Nearshoring, friend-shoring and "China plus one"
What each term means, what the trade data show, real moves in India, Vietnam, Mexico and the Gulf, and the maths of moving production: cost per unit, one-off cost, payback, lead time and tariff risk.
Firm processes and online tests change from year to year and differ by office. Use this to prepare, and confirm the exact current steps on the firm's own careers page.
Key takeaways
- Moving production is an investment. It pays when the yearly saving in landed cost and risk covers the one-off cost of moving within a sensible time, and it should still pay if tariffs change.
- Landed cost per unit (factory price, freight, tariff, inventory), the one-off cost of moving (tooling, qualification, start-up losses, often hidden in "ramp-up"), and risk (what happens to the answer if tariffs or exchange rates move).
- The strong answer uses landed cost, payback and a tariff test, and ends with the question that decides it.
Key idea
Moving production is an investment. It pays when the yearly saving in landed cost and risk covers the one-off cost of moving within a sensible time, and it should still pay if tariffs change. Do the maths per unit first, then the one-off cost, then test the risks.
The words
- Offshoring: moving production to a lower-cost country far away. Reshoring: bringing it back home.
- Nearshoring: moving production closer to the customer, such as Mexico for the United States, or Morocco, Türkiye and Eastern Europe for Western Europe.
- Friend-shoring: moving supply to countries that are political allies, to lower the risk of sanctions, export controls or conflict.
- "China plus one": keeping production in China but adding a second country, such as India, Vietnam, Indonesia or Mexico, so that one country's problems cannot stop everything.
| Source country | 2017 | 2025 |
|---|---|---|
| China | 505.2 | 308.7 |
| Mexico | 312.7 | 534.3 |
| Canada | 299.1 | 381.9 |
| Vietnam | 46.5 | 193.9 |
| India | 48.5 | 103.8 |
Source: US Census Bureau annual totals, read on 1 October 2026.
So-what
Imports from China fell by about 40 percent while Mexico, Vietnam and India grew fast; Mexico is now the largest single source.
Read the table with care. Part of the rise in imports from Vietnam and Mexico may be goods that are mostly made in China and only finished elsewhere. That is exactly why governments police rules of origin, and why the new US tariffs set a higher rate for some countries than for others.
Real moves in four regions
- India: under a production-linked incentive scheme launched in 2020, India's mobile phone exports grew from about Rs 0.27 lakh crore in FY 2019-20 to about Rs 2 lakh crore in FY 2024-25, according to the Ministry of Electronics and IT, making India the world's second-largest mobile phone maker.
- Vietnam: US imports from Vietnam rose from USD 46.5 billion in 2017 to USD 193.9 billion in 2025, more than four times, as electronics, furniture and clothing makers added Vietnamese plants.
- Mexico: the largest single source of US goods imports in 2025, at USD 534.3 billion. Goods that enter duty free under the USMCA are exempt from the 2026 Section 301 tariffs.
- The Gulf: Lucid, an electric car maker, opened Saudi Arabia's first car factory, AMP-2, in September 2023. It started by assembling kits made at its US plant, with capacity for 5,000 cars a year, and is adding 150,000 cars a year of full production, with the aim of a local supply chain. The UAE, with its free zones and low tariffs, works as a regional hub that re-exports goods across the Middle East, Africa and South Asia.
Landed cost per unit (factory price, freight, tariff, inventory), the one-off cost of moving (tooling, qualification, start-up losses, often hidden in "ramp-up"), and risk (what happens to the answer if tariffs or exchange rates move).
Worked case
Stay in China, move to Vietnam or move to Mexico?
The prompt
A fictional company sells 1,000,000 kitchen appliances a year in the United States, all made in China. Factory cost per unit: China USD 20.00, Vietnam USD 21.50, Mexico USD 24.00. Freight per unit: USD 1.20, USD 1.30 and USD 0.50. For this exercise, assume extra US tariffs of 25 percent of factory cost on goods from China, 12.5 percent from Vietnam and 0 percent from Mexico (USMCA-qualifying). Days of stock in transit and in safety stock: 60, 55 and 15, at USD 0.02 per unit per day. Moving costs USD 3 million for Vietnam and USD 6 million for Mexico. What should the company do?
The structure
- Decision = yearly saving vs one-off cost, tested against tariff changes
- Landed cost per unit in each location
- Yearly saving and payback
- Key: What if tariffs change?
The exhibit
| Cost item | China | Vietnam | Mexico |
|---|---|---|---|
| Factory cost | 20 | 21.5 | 24 |
| Freight | 1.2 | 1.3 | 0.5 |
| Assumed extra tariff | 5 | 2.69 | 0 |
| Inventory holding | 1.2 | 1.1 | 0.3 |
| Landed cost | 27.4 | 26.59 | 24.8 |
Working it through
1. China landed cost
Factory, freight, 25 percent tariff, 60 days of stock.
China landed cost (USD):20 + 1.2 + 20 × 0.25 + 60 × 0.02 = 27.42. Vietnam landed cost
Factory, freight, 12.5 percent tariff, 55 days of stock.
Vietnam landed cost (USD):21.5 + 1.3 + 21.5 × 0.125 + 55 × 0.02 = 26.593. Mexico landed cost
Factory, freight, no tariff, 15 days of stock.
Mexico landed cost (USD):24 + 0.5 + 0 + 15 × 0.02 = 24.84. Mexico saving per year
Against China, on 1,000,000 units.
Yearly saving, Mexico (USD):(27.4 - 24.8) × 1,000,000 = 2,600,0005. Mexico payback
One-off cost divided by yearly saving.
Payback, Mexico (years):6,000,000 ÷ 2,600,000 = 2.316. Vietnam payback
Saving of USD 0.8125 a unit against a USD 3 million move.
Payback, Vietnam (years):3,000,000 ÷ ((27.4 - 26.5875) × 1,000,000) = 3.697. If Mexico lost its exemption
A 10 percent tariff on the USD 24 factory cost.
Mexico landed cost with a 10 percent tariff (USD):24.8 + 24 × 0.1 = 27.28. If China's tariff fell to 10 percent
China's tariff drops from USD 5.00 to USD 2.00 a unit.
China landed cost with a 10 percent tariff (USD):20 + 1.2 + 20 × 0.1 + 1.2 = 24.4
What the exhibit shows
The dearest factory gives the cheapest landed cost, but only while the tariff gap lasts.
The recommendation
The company should move part of its production to Mexico, not all of it, and keep China as the second source. First, at today's assumed tariffs Mexico saves about USD 2.60 a unit, USD 2.6 million a year, and pays back its USD 6 million move in about 2.3 years, faster than Vietnam at about 3.7 years. Second, Mexico's 15 days of stock instead of 60 also frees cash and speeds response. The risk is that the answer rests on the tariff gap: if Mexico lost its USMCA exemption it would cost USD 27.20, about the same as China, and if China's tariff fell to 10 percent China would be cheapest at USD 24.40. As a next step, move about half the volume, keep both plants qualified, and review each year after the USMCA review.
The interviewer asks: "Should our client move its factory from China to Vietnam?"
Weaker answer
Yes, many companies are moving to Vietnam because China is risky and labour is cheaper there, so the client should follow the trend.
Stronger answer
I would compare landed cost per unit, not factory price: Vietnam's factory is about 7 percent dearer, but the tariff gap and slightly lower stock make it about 3 percent cheaper landed. That saves about USD 0.8 million a year against a USD 3 million move, so payback is close to four years. Because the saving depends on the tariff gap, I would test it: if the gap narrows by half, payback roughly doubles. I would want to know how long the client expects the current tariffs to last before recommending a full move.
Why the stronger answer wins: The strong answer uses landed cost, payback and a tariff test, and ends with the question that decides it. The weak answer follows a trend and gives no number.
US imports from Vietnam were USD 46.5 billion in 2017 and USD 193.9 billion in 2025. By how many times did they grow? Round to one decimal place.
A move cuts landed cost by USD 1.5 million a year and costs USD 9 million. What is the payback?
What does "China plus one" usually mean?
Sources for this lesson (9)
- US Census Bureau: trade in goods with China, annual totals
- US Census Bureau: trade in goods with Mexico, annual totals
- US Census Bureau: trade in goods with Canada, annual totals
- US Census Bureau: trade in goods with Vietnam, annual totals
- US Census Bureau: trade in goods with India, annual totals
- Press Information Bureau, Ministry of Electronics and IT: electronics manufacturing in India (6 February 2026; mobile phone exports Rs 0.27 lakh crore in FY 2019-20 to Rs 2 lakh crore in FY 2024-25)
- Lucid Group, Form 10-K for fiscal year 2025 (SEC filing): AMP-2 plant in Saudi Arabia
- The Official Portal of the UAE Government: customs duty and tariff (5 percent of CIF value; GCC origin rule; updated 14 September 2026)
- US Customs and Border Protection, CSMS 69326983: guidance on Section 301 forced labor import duties, effective 12:01 a.m. on 24 July 2026 (rates by country; USMCA exemption)
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