The China+N Strategy: Southeast Asia Wins the Supply Chain Sweepstakes

“China plus one” has described a cautious corporate strategy for several years: keep China as the core manufacturing base, add one alternative location as a hedge. In 2026, that framing is starting to date. The reality now is China plus many — and Southeast Asia is picking up most of it.

US tariffs on Chinese goods hit effective rates above 31 percent by early 2026, following a Supreme Court ruling that clipped the broadest emergency tariff powers. ASEAN member states face their own US tariffs, ranging from 10 to 48 percent, but the differential still strongly favours production that was never in China. The result is continued, accelerating investment into Vietnam, Thailand, Malaysia, Indonesia, and increasingly Cambodia and the Philippines.

What distinguishes the current wave is who is moving. Early supply chain diversification was driven by Western and Japanese multinationals reducing geopolitical risk. That group is still active, but Chinese manufacturers have joined them. Facing tariffs that make US-bound exports from China uneconomic, Chinese companies are building capacity in Southeast Asia through greenfield investment or joint ventures with local partners.

Vietnam leads for electronics and technology manufacturing. Malaysia has become a preferred location for semiconductor back-end production. Thailand continues to attract automotive and industrial investment. Indonesia, with its domestic market and commodity strengths, is building out a battery and electric vehicle supply chain.

The complexity has grown alongside the opportunity. US critics have raised concerns about “tariff laundering” — Chinese manufacturers moving only the final production stages to Southeast Asia to ship to the US at lower tariff rates, without genuinely relocating meaningful economic activity. Several Southeast Asian governments have faced pressure to show that investment represents real value addition, not transshipment.

For professionals advising on or investing in regional operations, this is no longer simply a question of where to manufacture. Infrastructure quality, labour force depth, regulatory stability, and the risk of secondary US tariff action targeting new production locations all matter. The supply chain map is being redrawn. The lines are not yet fixed.

US tariffs have pushed supply chain diversification into a new phase — not one backup location, but many — with Vietnam, Malaysia, Thailand, and Indonesia as the main beneficiaries. Chinese manufacturers are now significant participants in the shift. The harder questions are no longer about where to move, but about supply chain authenticity, infrastructure adequacy, and the risk that new locations attract their own tariff scrutiny.