For years, it was the world’s workshop. But a decisive shift is now underway. New data reveals that the massive move of supply chains away from China, supercharged by the Trump-era trade wars, has reached a critical tipping point.
A decade ago, a staggering 90% of supplier sales for many corporations came from China, Hong Kong, and South Korea. Today, that figure has been cut almost in half, plummeting to just 50%, according to an analysis by Wells Fargo Supply Chain Finance.
“The diversification outside of China nearly doubled from 2018 to 2020, right after the first tariffs hit,” said Jeremy Jansen of Wells Fargo. He notes the pivot toward South Asia-Pacific nations has been steady ever since. “It’s currently a 50/50 split in the region. We’re seeing the migration clearly to places like Vietnam, Indonesia, Thailand, India, and Malaysia.”
The numbers tell a dramatic story. While U.S. imports from China have fallen 26% year-over-year, trade within Asia is booming. China’s own trade with Indonesia jumped 29.2% this year, and with Vietnam by 23%. These nations are now feeding global demand, with Vietnam’s container traffic to the U.S. itself surging 23%.
HSBC points to these “new trade corridors” reshaping the entire region’s economic map.
The Cash Crunch forcing Corporate America’s Hand
With the fate of Trump’s proposed new tariffs still pending, the financial pain from the first round is hitting home now. U.S. companies are scrambling for cash as tariffs, which once averaged 1.5%, rocketed into double digits.
“We saw working capital needs shoot up right after the tariffs landed,” explained Ajit Menon, head of U.S. trade finance at HSBC. Sectors like generic drugs and retail, which operate on razor-thin margins, have been especially hard hit. “They lack negotiating power with suppliers, so they’re reworking payment terms and desperately need financing.”
The response has been a financing boom. HSBC reports a 20% increase in funding flows since April. A temporary buffer—stockpiling goods ahead of expected tariffs—has now run dry. “The excess inventory is almost gone,” Menon said. “Companies are going to need even more cash as they renegotiate everything.”
A recent HSBC survey found over 70% of U.S. firms face growing working capital pressures, forcing a brutal reassessment of how they do business. “They’re scrutinizing interest rates and loan terms,” Menon said. “In this new reality, cash is absolutely king.”
The message is clear: the trade war rhetoric sparked the shift, but the relentless math of balance sheets and logistics is now cementing it. China’s era of factory-floor dominance is facing its most formidable challenge yet.