How Zhejiang Hailiang is Outmaneuvering Tariffs and Capturing U.S. Copper Demand

In an era where geopolitical tensions and protectionist policies are reshaping global supply chains, Zhejiang Hailiang Co. has emerged as a masterclass in strategic adaptation. The Chinese copper producer's bold move to localize manufacturing in the United States—amid the Trump administration's 50% tariff on semi-finished copper imports—has transformed a potential liability into a competitive edge. By leveraging geographic diversification, cost arbitrage, and forward-looking supply chain design, Hailiang is not only surviving the tariff-driven upheaval but thriving in it. For investors, this case study offers a blueprint for identifying opportunities in a world where geopolitical positioning and localized production are no longer optional but essential.

Strategic Geopolitical Positioning: Turning Tariffs into a Moat

The U.S. copper market, heavily reliant on imports (accounting for ~600,000 tonnes annually), has become a battleground for trade policy. The Trump administration's 50% tariff on semi-finished copper imports, implemented in July 2025, was designed to shield domestic producers and reduce foreign dependency. However, for most Chinese manufacturers, this policy created a 50% price disadvantage. Zhejiang Hailiang, however, had already anticipated this shift.

Since 2020, the company has operated a Houston-based plant with an initial capacity of 30,000 tonnes annually. By 2025, it plans to triple this to 100,000 tonnes, directly supplying U.S. demand for copper tubes used in refrigeration, air conditioning, and automotive sectors. This localized production allows Hailiang to bypass tariffs entirely, enabling it to sell at premium prices while competitors face a steep cost barrier. The company's U.S. operations are now a key driver of its stock performance, with its share price surging nearly 20% post-tariff implementation—far outpacing both its Chinese peers and the CSI 300 Index.

Cost Arbitrage and Operational Resilience

While U.S. labor and material costs are higher than in China, Hailiang's localized strategy creates a unique cost arbitrage. By avoiding tariffs, the company's effective cost structure is lower than competitors who must absorb the 50% duty. This is compounded by its investments in intelligent manufacturing systems and digital production lines, which enhance efficiency and reduce waste.

The Houston plant, despite reporting a 35 million yuan net loss in 2024 due to expansion costs, is now on a path to profitability. Analysts at Citic Securities note that such losses are typical for high-cost region investments, with breakeven expected within 3–5 years. Hailiang's U.S. operations are also bolstered by strategic acquisitions, such as its planned stake in Golden Dragon Precise Copper Tube Group's Alabama facility. This move accelerates capacity expansion while securing access to established U.S. customer relationships and distribution networks.

Global Diversification as a Risk Mitigation Tool

Hailiang's success is not confined to the U.S. The company has built a global footprint with facilities in Indonesia, Morocco, and China, ensuring it is not overexposed to any single market. This diversification allows it to hedge against trade tensions, China's slowing domestic economy, and commodity price volatility. For instance, its Indonesian operations provide access to raw materials and lower-cost labor, while its Moroccan plant taps into European demand.

This multi-regional strategy is critical in a world where supply chains are increasingly regionalized. The U.S. government's push for reshoring, coupled with Europe's own protectionist measures, has created a “nearshoring” boom. Hailiang's early investments in localized production position it to benefit from these trends, as companies seek to reduce reliance on China-to-U.S. supply chains.

Investment Implications: A Model for the Protectionist Era

For investors, Zhejiang Hailiang's playbook offers three key lessons:
1. Prioritize Localized Production: Companies with U.S. or regional manufacturing bases are better positioned to navigate tariffs and supply chain disruptions.
2. Embrace Strategic Acquisitions: Hailiang's acquisition of Golden Dragon's Alabama plant demonstrates how cross-border deals can accelerate market entry and reduce costs.
3. Invest in Long-Term Resilience: While initial losses are inevitable in high-cost regions, the long-term payoff for tariff-resistant production is substantial.

Conclusion: A Case for Geopolitical Agility

Zhejiang Hailiang's U.S. operations exemplify how strategic foresight can turn geopolitical headwinds into tailwinds. By localizing production, the company has not only avoided tariffs but also secured a premium pricing position in a market increasingly hostile to foreign imports. As global trade policies continue to shift, investors should look for firms that mirror Hailiang's agility—those that diversify geographically, invest in localized manufacturing, and align with regionalization trends. In a protectionist era, the winners will be those who build supply chains that are as flexible as they are resilient.

For copper producers, the message is clear: the future belongs to those who outmaneuver tariffs with innovation, not just compliance. Zhejiang Hailiang is leading the way.