The prolonged trade war between the US and China plus the emergence of COVID-19 have changed how importers should evaluate risk when finalizing their sourcing options. Importers that rely 100% on China for sourcing are more at risk than importers that have multiple sourcing options.
Many US importers have already learned a lesson from relying too heavily on China for their manufacturing requirements. China is currently experiencing a major loss of production to other Asian countries. US imports from China during Q1 2020 declined over 20% versus Q1 2019. A more telling statistic is that if you exclude China, Q1 2020 US imports from Asia were up over 10%.
Although sourcing is shifting to other Asian countries, China will still remain a force for the foreseeable future. The infrastructure in China has been built over the last 30 years. Other Asian countries are years behind providing an infrastructure capable of meeting demand that China can already offer. The impact of COVID-19 will hopefully soon be behind us and US demand will return to normal. When this happens, China will have available factories ready for production while other Asian countries will be scrambling to satisfy production demands.
Experts predict over the next several years, US importers will continue to diversify their sourcing options by shifting away from China. Until that happens, China is still the leader and remains one of Asia’s most viable sourcing options.