For decades, China dominated supply chains, with most manufacturing countries following a China Plus One strategy for sourcing or diversifying their operations by adding another location in Asia. But now China’s growth has weakened. China’s production numbers are dropping and factory activity is slower than expected. In September, US companies paid 54 per cent more in tariffs year over year, and many are now recognizing the importance of diversifying their supplier base to more than just plus one. In fact, more than 60 per cent of apparel companies are now sourcing from at least 20 countries.

Supplier diversity is a hallmark of business wisdom, but when companies add to their supplier base it introduces other variables that can offset the benefits of simply leaving China and its uncertainty behind. For instance, labor costs are by no means fixed, and in many countries that are popular substitutes for China sourcing–Bangladesh, Vietnam, Mexico–labor costs are expected to rise between five per cent and 16 per cent. In Bangladesh, labor costs are expected to increase by 51 per cent in the coming months.

Another key consideration for companies is that, even if they move production out of China, they’ll avoid potential tariff costs only if specific conditions apply.