Trump trade war shift away from China’s factories at tipping point

According to an analysis from Wells Fargo Supply Chain Finance, volume for suppliers in China, Hong Kong and Korea has fallen from 90% to 50% over the past decade; This reflects the long-term diversification of supply chains that accelerated during the first Trump administration and the trade war.

“From 2018 to 2020, supplier diversity away from China nearly doubled following the initial tariffs,” said Jeremy Jansen, head of global lending at Wells Fargo Supply Chain Finance.

Since the first trade war, the gradual increase in supply chain diversity from China to the South Asia Pacific region has steadily increased, he says.

“In terms of our number of suppliers, the diversity between the North Asia Pacific region and the South is now 50/50,” Jansen said. “The migration of medium-sized suppliers can be traced to Taiwan, Vietnam, Indonesia, Thailand, India and Malaysia,” he added.

Imports from China to the United States fell 26 percent year-on-year, but trade volumes from China to the South Asia Pacific region increased significantly, according to data from shipping intelligence firm SONAR.

According to Project 44, which tracks changes in the supply chain, China’s trade in 2025 increased by 29.2 percent to Indonesia, 23 percent to Vietnam, 19.4 percent to India and 4.3 percent to Thailand. In comparison, container trade volume to the United States increased by 23 percent for Vietnam, 9.3 percent for Thailand and 5.4 percent for Indonesia on an annual basis.

While it remains unclear what will happen to President Trump’s tariff plan with a U.S. Supreme Court decision pending and major companies suing for refunds, in the short term the impact of President Trump’s tariffs may be increasingly visible on business balance sheets as U.S. importers turn more to financial regulations to preserve cash.

“We saw an increase in working capital needs due to higher tariffs after Independence Day,” said Ajit Menon, head of HSBC’s U.S. trade finance unit. “The average tariff went from 1.5 percent to double digits,” he said.

Menon said the financial hit varies from sector to sector. For example, generic drugs and retail/apparel industries lack bargaining power due to low margins. “Therefore, trade counterparties are negotiating alternative payment terms, and this is where the need for financing arises,” Menon said.

HSBC, which finances global trade flows of more than $850 billion a year, introduced its Trade Pay platform earlier this year, which helps customers earn money from receivables, payables and inventories.

Since President Trump implemented sweeping global tariffs in April, the bank has seen a nearly 20 percent increase in financing flows across all customer segments, with utilization increasing due to inventory being brought into the U.S. in early 2025 as part of front-loading trade, Menon said. “The excess stock introduced to offset tariffs is now almost exhausted,” Menon said. “This means companies will need more working capital as terms are renegotiated.”

In a recent survey of 1,000 U.S. companies conducted by HSBC, more than 70 percent of respondents said they faced increasing working capital requirements year over year, prompting many to re-examine their supply chain strategies and payment terms, Menon said.

“They look at what rates they’re paying and also the financing term. Cash is becoming king,” he said.