Top global companies in the US and other leading economies are shifting production out of China rapidly due to growing geopolitical uncertainties and rising costs, a new study has found. The move--also fuelled by a proposal by the new US President Donald Trump to impose a 60 percent tariff on all Chinese imports--has made the Indian subcontinent the top destination for the executives.
The study conducted by Bain and Company was based on responses from 166 CEOs and COOs in the US and other leading economies with 90 percent managing businesses with revenues more than $1 billion. The analysis indicates that most companies want to reduce their dependence on China. The share of companies moving operations out of China jumped to 69 percent in 2024 from 55 percent in 2022, and 39 percent of the executives said they are heading to the Indian subcontinent, it stated. Other leading destinations include the US and Canada (16 percent), Southeast Asia (11 percent), Western Europe (10 percent), and Latin America (8 percent).
Bain also found that more companies are “reshoring” operations to their home countries or “near-shoring” to neighboring countries.
"The acceleration of the reshoring trends underlines how heightened geopolitical turbulence and pressures for greater sustainability and reduced carbon footprints, alongside the post-pandemic goal to deliver greater resilience in supply chains, have disrupted the previous business rationale for low-cost offshore manufacturing hubs, tilting the balance towards operations closer to home markets," the survey stated.
Hernan Saenz, Bain & Company partner and global head of the firm’s Performance Improvement practice, stated in a release: “We believe the current acceleration of reshoring across key markets worldwide is a crucial trend that demands CEOs’ attention. The multiple disruptions companies have grappled with since the pandemic mean the question for company leaders is no longer whether to reinvent supply chains but how to do that so their operations are made more cost-competitive, resilient, sustainable, and agile in responding to evolving markets and customer needs.”
Donald Trump's tariffs may deal a severe blow to China’s economy
If the US does impose higher tariffs on China, it could deal another severe blow to the economy which has already been grappling with a real estate crash, debt woes, and pockets of deflation, Fortune reported.
Exports are one of China’s key economic engines and the flood of cheap exports from the world's second-largest economy has prompted other countries to impose more trade barriers against Beijing.
During his first term as the US President, Trump had imposed tariffs on Beijing as part of his “America first” economic policies, exposing the risk of relying too heavily on Chinese factories. And for his second term, Trump has vowed to hike tariffs across the board, including stiffer duties on China.
At a rally in June, he said: “We are going to be so tough, and if a country is not going to behave, we’re going to tariff the hell out of that country.”
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
