In the wake of the U.S.-China trade war and fluctuating tariff policies, many companies are reassessing their manufacturing and supply chain strategies amid changing economic incentives. A Chinese-owned flashlight factory located near Bangkok, Thailand, exemplifies the complex dynamics companies face in choosing production sites between China and Southeast Asia.

The factory, operated by Ningbo Bright Electric and producing flashlights for American clients such as the Texas-based Alliance Consumer Group (ACG), was initially established in response to high U.S. tariffs on Chinese goods during the peak of the trade war. These tariffs, which reached up to 145 percent during President Trump’s administration, prompted many companies to seek alternatives in countries like Vietnam, Thailand, and Cambodia. However, following recent tariff reductions—such as the reinstatement of a 12.5 percent tariff rate on Chinese exports—some companies are reconsidering their decisions to shift production out of China.

Phil Laster, ACG’s chief operations officer, noted that while the company had invested millions over 18 months to develop factories and supply chains outside China, the narrowing tariff gap has made China competitive once again. Flashlights shipped from Thailand face tariffs roughly equivalent to those from China—around 20 percent—and production costs in Southeast Asia can be 12 to 15 percent higher due to factors such as less developed supply chains, higher material and transportation expenses, bureaucratic challenges, and infrastructure limitations. For example, components like semiconductors and aluminum used in manufacturing often need to be imported into Southeast Asia from China and South Korea.

This cost disparity has pressured companies like ACG, which also faces lower-priced products sold by Chinese competitors in the U.S. market. Despite wanting to diversify supply chains to reduce risk, particularly after pandemic-related disruptions, economic considerations remain a significant factor. Factory manager Pan Danfeng, who relocated from China to oversee operations in Thailand, acknowledged the logistical benefits of manufacturing closer to suppliers in China but expressed optimism about growing production capabilities in Southeast Asia over time.

Industry analysts observe that China’s large-scale industrial base provides a strong competitive advantage. According to Deborah Elms, head of trade policy at the Hinrich Foundation, economic logic continues to favor a significant share of manufacturing in China due to scale and cost efficiencies. North American imports from China have declined sharply since 2018, while goods from Mexico, Vietnam, and Taiwan have surged, yet some expect partial reversals if tariff differentials remain low.

Trade experts also highlight the ongoing uncertainty surrounding U.S. tariff policy. While the administration is expected to announce new tariffs linked to trade investigations into government subsidies and industrial policies, it may avoid raising rates on China beyond around 20 percent to prevent escalating tensions and retaliation. U.S. Trade Representative Jamieson Greer has cautioned companies about the risks of over-reliance on China, despite some speculation about returning supply chains.

For now, companies like ACG continue a cautious balance, maintaining some production in Southeast Asia to sustain supply chain diversification while grappling with competitive pressures and cost realities that often favor China. The evolving landscape underscores the challenges in reshaping global manufacturing networks amid trade uncertainties and shifting economic factors.