ON a dusty industrial site south of Bangkok, a flashlight factory stands as a reminder of a global supply chain gamble that is now being reconsidered.
Inside the facility, workers assemble components by hand at tables while large sections of the factory remain empty, awaiting production lines that were planned during a period of intense uncertainty over US-China trade relations.
The factory, owned by Chinese manufacturer Ningbo Bright Electric, was established as part of a broader effort by companies to reduce dependence on China after US President Donald Trump raised tariffs on Chinese imports to as high as 145 per cent in 2025.
The New York Times reported on Saturday that the dramatic tariff escalation triggered a scramble among manufacturers to shift production to alternative locations including Thailand and Vietnam.
But as US tariffs on Chinese goods have since fallen sharply, some companies that rushed to diversify their supply chains are now questioning whether abandoning China was the right decision.
“Have we pulled back to China? Yes, we have,” said Phil Laster, chief operations officer of Texas-based Alliance Consumer Group (ACG), which sells flashlights produced at the Thai factory to American consumers.
Laster had previously encouraged Ningbo Bright Electric to expand manufacturing outside China, but he has since slowed that strategy as the tariff difference between China and South-east Asian production centres has narrowed.
The unexpected outcome of the tariff battle is that China, despite being the original target of Washington’s trade measures, has regained a position of relative strength as companies weigh costs, efficiency and supply chain reliability.
The Trump administration recently imposed a new tariff rate of 12.5 per cent on Chinese exports, bringing duties closer to levels faced by many other trading partners while attempting to restore tariff measures that were struck down by the US Supreme Court in February.
Chinese goods remain subject to additional duties from earlier trade actions, and further tariff measures remain possible.
However, industry leaders and analysts increasingly believe Washington may avoid imposing significantly higher tariffs on China in the near term to prevent further disruption to an already fragile economic relationship.
An analysis by Chinese financial firm Guojin Securities estimated that the overall weighted US tariff rate on Chinese goods is now slightly above 23 per cent.
For some products, the tariff burden on Chinese exports is almost equal to that faced by manufacturers operating from South-east Asian countries where companies had shifted production.
For businesses such as ACG, the changing tariff environment has created a difficult balancing act.
“We don’t want to go back to China, but at the same time, we’ve got a business to run,” Laster said.
Producing flashlights in Thailand can cost up to 15 per cent more than in China due to higher material, transport and logistics expenses.
ACG is also facing growing competition from Chinese manufacturers selling flashlights on Amazon at prices below what the US company can afford after shipping its products to American markets.
Trump has long argued that Chinese manufacturers have undermined American competitors and has used tariffs as a tool to pressure companies into reshoring production.
During his first term, Trump launched a trade war with Beijing, imposing tariffs on about two-thirds of Chinese exports beginning in 2018.
In his second term, China became an early target, with duties raised to triple-digit levels before Beijing responded by restricting exports of critical minerals, forcing Washington to soften its approach.
The uncertainty prompted companies worldwide to explore alternatives outside China.
US imports from China declined sharply after reaching a peak in 2018, with Chinese goods imports falling by almost a third in 2025 as shipments from Mexico, Vietnam and Taiwan increased.
However, economists say China’s manufacturing advantages remain difficult to replace.
“If tariffs on China settle near those on alternative locations, we expect to see some companies returning to their Chinese suppliers,” said Mary Lovely, an economist at the Peterson Institute for International Economics.
The challenge of moving away from China is particularly evident in Xidian, a Chinese industrial town near the East China Sea known as “Torch City” for its dominance in flashlight production.
According to Chinese state media, Xidian produces about 60 per cent of the world’s flashlights, supported by hundreds of factories producing LED bulbs, circuit boards and switches.
Its location near major ports and efficient shipping routes has helped Chinese manufacturers maintain their cost advantage in global markets.
“China keeps doing really well because they just have the scale to produce things that much cheaper,” said Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore.
“Economic logic is going to drive you to have a very large share of manufacturing in China,” she added.
ACG, which employs about 300 people in North America, owns five brands producing flashlights, headlamps, lanterns, knives, power banks and hand warmers.
Much of its production had historically been concentrated in Xidian, but supply chain disruptions during the Covid-19 pandemic exposed the risks of relying too heavily on a single manufacturing base.
After joining ACG in 2023, Laster began encouraging suppliers to invest outside China and explored manufacturing options across Asia, Mexico and Eastern Europe.
Over 18 months, the company invested millions of dollars in equipment and factory certification in Thailand, Vietnam and Cambodia.
By 2025, ACG had developed enough capacity to manufacture more than three-quarters of its products outside China. Yet two-thirds of its actual production remained in China because cost advantages continued to favour Chinese factories.
Flashlights, for example, faced a 20 per cent tariff when exported from China compared with 19 per cent from Vietnam, Thailand and Cambodia.
Laster said manufacturing costs outside China were already 12 per cent to 15 per cent higher even before tariffs, partly because key components such as semiconductors and aluminium still had to be sourced from China and South Korea.
South-east Asian manufacturing hubs also face more complex bureaucracy, weaker infrastructure and less developed supplier networks.
Chinese companies, meanwhile, continue to benefit from decades of industrial development, established supply chains, government support and access to cheaper financing.
Sebastien Breteau, founder of supply chain auditing firm Qima, said some companies had shifted production back towards China after fuel shortages linked to the Iran war disrupted factories in countries such as Vietnam.
“As soon as you have a little stress, you find that because all those factories have no more fuel to power their factories, companies rush back to China,” Breteau said.
Steve Okun, chief executive of APAC Advisors, said companies were increasingly recognising the advantages of Chinese manufacturing despite concerns about overdependence.
“Now that companies have been manufacturing elsewhere, they see the massive benefit of manufacturing in China, even with the risk of having all their supply chain eggs in one basket,” he said.
However, US Trade Representative Jamieson Greer warned companies that returning too heavily to China could expose them to future risks.
Although Washington is seeking greater stability with Beijing, he said businesses should remember how quickly tariffs escalated during the previous trade confrontation.
“I think, overall, people understand the direction of travel,” Greer said. “They understand the high-risk nature of being super reliant on China.”
The future of US tariffs on Chinese goods is now the key factor shaping corporate decisions.
The Trump administration is expected to announce further tariffs following investigations into foreign industrial policies, including government subsidies supporting manufacturing.
With China maintaining exports worth hundreds of billions of dollars and an annual trade surplus exceeding US$1 trillion, analysts believe Beijing remains a likely target.
However, some experts expect Washington to avoid pushing tariffs far beyond the 20 per cent range reached in late 2025, warning that higher rates could provoke retaliation and damage the fragile trade truce.
Elms said Chinese officials viewed 20 per cent as a likely ceiling.
“The assumption that everyone is making is that no one is going to go above China,” she said.
That could create difficulties for Thailand, Vietnam and Indonesia, which have positioned themselves as alternatives for companies seeking to diversify away from China.
Despite uncertainty, businesses are unlikely to abandon diversification efforts entirely.
At the Ningbo Bright Electric factory in Thailand, many components and machines remain Chinese-made, highlighting China’s continued importance in global manufacturing networks.
Factory manager Pan Danfeng, who moved from China to Thailand, said operating in China remained easier because suppliers were located nearby.
However, he believes more production will gradually shift to Thailand as local supply chains develop.
For now, Laster continues sending some production to South-east Asian factories to maintain alternative supply routes despite higher costs.
But investments aimed at moving components such as lithium-ion batteries and printed circuit boards outside China could eventually be reversed if the economics no longer work.
“If we can make the numbers make sense, then absolutely we want to invest in other places,” he said.
But he added: “We can’t just continue to throw away money.” - August 1, 2026
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