Implications for U.S.-China Trade, Global Supply Chains, and China-Plus-One Strategy

Diego Mesa
May 26
5 min read

Understanding the Tariff Pause: What It Means for Global Trade

The recent U.S. decision to pause tariffs on China, reducing them dramatically from 145% to 30%, represents a major turning point in U.S.-China trade relations and global trade. This 90-day tariff truce is designed to reignite negotiations and de-escalate tensions between two of the world’s largest economies, creating ripple effects throughout international trade and supply chains worldwide.

Financial institutions and brokerages have reacted positively to this change, scaling back recession forecasts for the U.S. For example, Goldman Sachs reduced its recession probability from 45% to 35%, while Barclays dismissed recession risks outright. This renewed confidence is largely based on how the tariff pause is expected to spur global economic recovery and boost business confidence, with lower trade costs and increased economic activity.

Significantly, the agreement lowers costs for U.S. sectors that rely heavily on Chinese imports. As an example, the effective tariff on U.S. soybeans going into China has dropped, improving conditions compared to the previous 34% pre-truce rate. While this pause alleviates some immediate threats, uncertainty about the future of U.S.-China relations remains, impacting businesses and jobs linked to trade and export.

Ultimately, the tariff pause offers a window for potential economic recovery and greater supply chain resilience, but the long-term outcome will depend on further negotiations and ongoing geopolitical shifts.

The Rise of 'China-plus-One': Opportunities and Challenges

The China-plus-one strategy has gained traction as companies diversify manufacturing beyond China, aiming to strengthen supply chain resilience and manage tariff and geopolitical risks. Rising labor costs and trade tensions have made relocating production increasingly attractive. Vietnam stands out, benefiting from its affordable workforce and proximity to key markets, becoming a significant player in the new era of global supply chains. Apple’s increased investment in Vietnamese facilities illustrates this trend.

Meanwhile, Mexico is uniquely positioned due to its geographical closeness to the United States and advantageous trade agreements like the USMCA. Manufacturers are choosing Mexico to reduce transportation costs and lead times while lowering business impacts from U.S.-China tariffs.

Vietnam: Competitive labor costs, market access, and proven manufacturing expertise
Mexico: Nearshoring opportunities and tariff mitigation for North American trade
Additional destinations: Emerging options for global manufacturers seeking risk diversification

But diversification brings challenges: Manufacturers in destinations like Vietnam and Mexico now face stiffer competition, as the influx of new entrants can drive down prices and affect profitability. In Malaysia, previously a competitive hub, manufacturers are raising concerns over factory closures and potential social impacts as firms shift to lower-cost neighbors.

In essence, the China-plus-one strategy unlocks growth potential for Vietnam and Mexico but calls for strategic adaptation by local manufacturers and governments as the landscape evolves.

The Pressure on China-plus-One Countries

The 90-day U.S.-China tariff pause has ramped up pressure on China-plus-one countries—especially Vietnam and Mexico—to strike favorable trade agreements with the U.S. These regions have become strategic alternatives for global supply chains, leveraging lower manufacturing costs and an opportunity to avoid steep tariffs.

With the pause providing only a temporary reprieve, the need for effective negotiation is urgent. Countries that fail to act swiftly may see companies reallocate investments to more business-friendly markets, slowing their economic growth. According to analysts, hesitation in these fast-evolving global trade dynamics could result in lost investment both now and in the future.

The stakes are high, and success hinges on rapid, strategic engagement with the U.S. to secure a place in the changing framework of global supply chains.

Business Leaders Respond to Tariff Developments

Business leaders—and especially those in retail and foodservice—are reacting quickly to the 90-day tariff pause on Chinese imports. By temporarily reducing tariffs from 145% to 30%, firms are able to better manage their supply chain costs and stabilize prices for customers, which may help them sustain profitability amid economic uncertainty. As reported by Paytronix, convenience stores and restaurants feel relief, using this window to renegotiate with suppliers and review their pricing strategies.

U.S. Treasury Secretary Scott Bessent described an "export rush" as businesses rush to fulfill orders while tariffs are low, creating a unique period of heightened activity and urgency. Many are weighing the effects of the pause on future pricing models, recognizing that market forces and possible future tariff changes could mean longer-lasting price increases, even if tariffs eventually come down.

Temporary tariff relief enables strategic supply chain management and price stability.
Uncertainty persists, requiring dynamic leadership for jobs, wage stability, and operational efficiency.

Explore the impact of the U.S.-China tariff pause on global trade

What’s Next for U.S.-China Trade Relations?

With a 90-day truce and significant tariff reductions, U.S.-China trade relations are in a rare phase of stability—at least for now. This development has sparked cautious optimism among market analysts, with many predicting a short-term uptick in bilateral trade as companies navigate the shifting landscape.

Looking ahead, experts like Scott Kennedy of CSIS believe trade relations will remain unpredictable, influenced by political considerations and global market pressures. Business groups remain wary, pointing out that even reduced tariffs are higher than historical norms, sometimes complicating long-term strategic planning. Some forecasts even suggest that negotiations could result in new tariffs or a reinstatement of old ones, depending on political outcomes.

As the next rounds of talks approach, businesses must keep a careful watch, weighing risks and opportunities in the ever-evolving sphere of U.S.-China trade and global economic recovery.

Broader Implications for Global Manufacturing

This tariff pause between the U.S. and China is prompting deep changes in global manufacturing and preventing knee-jerk reactions in supply chain management. Countries such as Vietnam and Mexico face growing pressure to negotiate better trade terms with the U.S., a sure sign that the China-plus-one strategy will remain crucial for supply chain resilience.

According to the GEP Global Supply Chain Volatility Index, there has been a notable decline in raw material demand across both North American and Asian manufacturers, illustrating the current uncertainty in global supply chains. Companies are hesitant to invest or commit to large-scale production while trade policy remains in flux.

Major companies such as Apple are responding by adjusting their sourcing strategies, turning to Vietnam and other China-plus-one countries for production, yet still grappling with tariffs on goods made in second-tier manufacturing markets. Moving forward, expect investment to increasingly shift toward regions that combine favorable trade environments with the right production cost mix—making flexibility and strategic reassessment essential for every global manufacturer.