For three decades, the logic of global manufacturing was simple: make it in China, ship it everywhere else. That logic is now unravelling at speed, and the countries positioned to catch the fallout are booking some of the most significant economic windfalls of the decade.
The numbers tell the story plainly. US goods imports from China totalled $308.4 billion in 2025 — down 29.7% from 2024 and the lowest figure since 2009. For North American buyers, the combined share of their top three supplier nations fell from 61% to 54% in a single year. A structural shift that economists debated for years as a theoretical possibility is now happening in real time, driven by a convergence of tariff exposure, geopolitical risk, rising Chinese labour costs, and a hard-won post-pandemic lesson about the fragility of single-source supply chains.
The question is no longer whether companies are leaving. It is who is winning the business they left behind.
Mexico: The Nearshorer’s First Call
No country has moved faster to capitalise on the China exodus than Mexico. In the first three quarters of 2025 alone, Mexico attracted a record $40.9 billion in foreign direct investment — a 14.5% year-on-year increase already surpassing the full-year 2024 record, with greenfield investment tripling to $6.56 billion. Manufacturing exports to the US have risen by $150 billion since 2021, reaching $535 billion in 2025. Mexico climbed six spots to 19th place in Kearney’s 2026 FDI Confidence Index, one of the largest single-year gains globally.
The case for Mexico is structural, not cyclical. Manufacturing wages of approximately $4.90 per hour remain roughly 25% below China’s — an advantage no Asian competitor can replicate through logistics alone. USMCA compliance rates have surged from 45% to 89%, meaning a far greater share of Mexican-made goods now qualify for preferential tariff treatment when entering the US market. Transport equipment — automotive, aerospace, EV battery production — has led the investment surge, accounting for nearly half of all manufacturing FDI in 2025, but electronics and semiconductors are growing faster in percentage terms.
The caveats are real. Mexico’s GDP grew just 0.6% in 2025, constrained by weak domestic investment and a cautious monetary policy stance. Manufacturing employment has fallen for 35 consecutive months even as capital poured in, pointing to productivity gains that don’t yet translate into broad job creation. The 2026 USMCA review looms as the single biggest variable: a favourable outcome could unlock the next wave of delayed investment; an acrimonious renegotiation could freeze it.
Vietnam: The Electronics Magnet
Vietnam has absorbed more China-diversion manufacturing volume than any other single country in Asia. Electronics inspection demand rose 30% year-on-year in 2025, and the names relocating or expanding there read like a who’s who of global tech: Apple is shifting AirPods, iPad, and MacBook component production to the country; Nike, Samsung, Intel, and LG all have significant Vietnamese manufacturing operations; the country now supplies approximately 20% of all US apparel imports.
The strategic appeal is clear — competitive labour costs, a young and growing workforce, strong existing export infrastructure, and trade agreements with most major economies. But Vietnam’s position is more complicated than the headline growth suggests. A 46% reciprocal tariff rate was imposed under the US “Liberation Day” tariff order in April 2025, currently paused at 10% through a 90-day negotiation window. If that pause expires without a deal, some of the manufacturing that fled China’s tariffs could find itself facing comparable exposure in its new home.
Supply chain bottlenecks have also emerged as production volumes outpace infrastructure. Apple reportedly saw a 10% increase in lead times for some Vietnamese-made products in late 2024. Vietnam is a real winner — but a winner with constraints that will take years and billions of dollars to fully resolve.
India: The Long Game, Paying Off
India is the story that took the longest to materialise but is now arriving at scale. Electronics have climbed from India’s seventh-largest export category in 2021-22 to its third-largest and fastest-growing by 2024-25, with electronics exports rising eightfold over the past decade. In the first half of fiscal 2025-26, electronics exports hit $22.2 billion — a sector that is now on track to become India’s second-largest exported item. India’s electronics industry total turnover exceeded $150 billion in the 2025-26 fiscal year, and the country has emerged as the world’s second-largest mobile phone manufacturer, up from just two mobile manufacturing units in 2014 to more than 300 today.
The engine behind this transformation is India’s Production-Linked Incentive (PLI) scheme — a government programme that pays manufacturers a percentage of incremental output, effectively de-risking the initial cost of building Indian supply chains. The scheme has directly contributed to a tripling of electronics exports between 2020 and 2025. Apple’s investment in Indian manufacturing now exceeds $1 billion and is accelerating.
India’s challenge is the component gap. Roughly 70-80% of components — displays, chips, advanced sub-assemblies — are still imported, meaning India is currently assembling global supply chains rather than manufacturing deep into them. The government’s Electronics Component Manufacturing Scheme, launched in 2025 with a budget doubled to $4.8 billion in the 2026 budget cycle, is explicitly designed to close this gap. The timeline is five to ten years. But the direction is now irreversible.
The Winners Nobody Is Watching
Three further beneficiaries deserve attention.
Indonesia is emerging as a credible alternative for resource-intensive and labour-intensive manufacturing, backed by the world’s largest nickel reserves and a government actively using mineral export restrictions to force downstream processing investment onshore. It is early-stage but directionally significant.
Poland and Eastern Europe are capturing European supply chain diversification that mirrors the US-led shift — European companies reducing China exposure tend to nearshore to Central and Eastern Europe, much as US companies nearshore to Mexico. Poland’s manufacturing sector has posted consistent growth, and the country’s combination of EU membership, skilled labour, and proximity to Western European end markets makes it the continent’s de facto beneficiary of nearshoring.
Morocco is quietly building a position as the Africa-facing manufacturing hub for European companies — automotive, aerospace, and textiles — with competitive labour costs and a geographic advantage that no East Asian competitor can match for European supply chains.
The Limits of the Dividend
The de-globalisation dividend is real, but it is not limitless, and several structural realities constrain how quickly it compounds.
China is not passive. Chinese manufacturers have responded to tariff pressure partly by relocating operations to Vietnam, Malaysia, and Mexico themselves — meaning some of the “China Plus One” shift has delivered Chinese production in a different wrapper rather than genuinely diversifying supply. Regulators in Washington and Brussels are increasingly aware of this dynamic and tightening rules-of-origin enforcement accordingly.
Capacity takes years to build. Factory floors, port infrastructure, trained workforces, and component ecosystems don’t materialise in a tariff cycle. The countries winning this transition are those that began investing in industrial capacity five to ten years ago — Vietnam and Mexico both fit this description. Countries trying to accelerate from a standing start are finding that the gap between announced investment and operational capacity is measured in years, not quarters.
And the US tariff regime remains volatile. Businesses making 20-year infrastructure commitments are doing so against a backdrop of trade policy that has shifted multiple times in three years. Every time the negotiation window extends, or a new tariff round lands, capital decisions that seemed settled go back into review.
The Bottom Line
The globalisation that built China’s manufacturing dominance over three decades is not reversing in three years. What is happening is a genuine, data-confirmed diversification — a shift from a single dominant hub to a multi-node system in which Mexico, Vietnam, India, and a set of regional nearshoring alternatives each absorb a meaningful share of flows that once moved through Shenzhen and Shanghai without question.
The countries collecting the dividend are those that made the infrastructure investments early, maintained policy stability, and stayed close to the end markets their customers serve. The race is not over — but the starting grid is becoming clear.
Sources: US Office of the United States Trade Representative; QIMA Q1 2026 Supply Chain Barometer; Kearney 2026 FDI Confidence Index; Morgan Stanley “Mexico’s Domestic Opportunity”; BBVA Research; India Ministry of Electronics and Information Technology; India Economic Survey 2025-26; FreightWaves; IVHub; DocShipper 2026 China Plus One Analysis.
