Vietnam’s Covid outbreak is pushing manufacturing back into China

Companies have spent the past several years moving manufacturing out of China and into neighboring southeast Asian nations, both to exploit cheaper labor in other countries and to dodge tariffs imposed during the Trump administration’s trade war with China. Vietnam has been one of the most popular destinations for US companies opening up new factories, along with Cambodia, Indonesia, Myanmar, and Malaysia.

Now, companies are scrapping those efforts and moving their factories back to China after a punishing wave of Covid-19 infections has shuttered factories across Vietnam. After three months of lockdowns, the Vietnamese government is only just beginning to gradually ease restrictions. Earnings calls are resounding with executives’ worries over their lost manufacturing capacity.

“I talked to one CEO who shared with me that he had six years of supply chain work they undid in six days,” said Roger Rawlins, CEO of the footwear and accessory conglomerate Designer Brands,  according to a FactSet transcript of a Sept. 14 management conference. “And when you think about the amount of effort everyone was putting into getting out of China, and now one of the places where you can get goods is China—it really is crazy, the rollercoaster that everybody’s been on.”

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