For decades, China has played a central role in the global supply chain due to its manufacturing scale, low labor costs, and well-developed industrial system. However, economic, political, and trade shifts are gradually reshaping the global landscape. One of the most significant factors driving this transformation is the U.S.- China trade war. The imposition of high tariffs on Chinese goods by the U.S. has forced many enterprises to adjust their supply chain strategies to mitigate risks and optimize costs. Beyond tariffs, escalating geopolitical tensions between the world’s two largest economies have triggered a series of consequences, ranging from supply chain restructuring to the urgent need for production diversification.

Furthermore, the COVID-19 pandemic has exposed the vulnerabilities of highly concentrated supply chains, accelerating the trend of production relocation to other countries. Against this backdrop, Vietnam has emerged as a promising destination, thanks to its competitive labor costs, strategic geographic location, and open trade policies. However, to fully capitalize on these opportunities, Vietnam must overcome several challenges, including inadequate infrastructure, a limited skilled workforce, and increased scrutiny from the U.S. This paper not only analyzes the impact of the U.S.-China trade war on global supply chain shifts but also evaluates Vietnam’s competitive position in this evolving landscape. Additionally, it offers strategic recommendations to help businesses and policymakers leverage these opportunities, enhance competitiveness, and promote sustainable development.

In the context of global supply chains, production relocation is a core strategy aimed at minimizing costs, optimizing distribution, and strengthening competitive positioning (Chopra & Meindl, 2007; Slack et al., 2022). Firms typically shift operations to low-wage countries or emerging markets while striving to maintain supply-chain flexibility, respond quickly to market changes, and reduce risks associated with tariffs, local regulations, and environmental factors (Christopher, 2016). Relocation from developed to developing economies often occurs in labor-intensive sectors such as footwear, textiles, and electronics assembly, enabling companies to capitalize on lower wages and investment incentives (Kinkel, 2012; Aykut & Ratha, 2003; VCCI, 2024; Mai & Phuong, 2020). At the same time, FDI into Southeast Asia has increasingly targeted high-technology and electronics manufacturing, driving technology transfer and modern management practices. However, industries requiring advanced technology or skilled labor face relocation barriers if initial infrastructure costs outweigh expected gains, especially where legal transparency and intellectual-property protection are weak (Helpman, 1984; PwC Vietnam, 2023).

Meanwhile, South-to-South relocation has accelerated under the “China Plus One” strategy, which diversifies supply chains and reduces dependence on China amid rising labor costs and disruptions from trade tensions and pandemics (Tse et al., 2021). Host countries benefit not only from cheap labor but also from tariff incentives, infrastructure investment, and streamlined procedures, even though technology transfer frequently remains at basic or intermediate levels. Such flows concentrate in labor- or resource-intensive industries, placing pressure on local environments due to underdeveloped waste-management and resource-extraction infrastructures.

The strategic importance of production relocation extends beyond cost reduction and distribution efficiency. It enhances operational agility, market-responsiveness, and technology diffusion (Chopra & Meindl, 2016; Christopher, 2016). Leveraging tax incentives and infrastructure investments lowers operating expenses and boosts profitability. To sustain these gains, firms must enforce quality control, nurture international partnerships, and restructure their supply chains to navigate logistics challenges, political volatility, and diverse production requirements (Slack et al., 2022). Production relocation thus reshapes global resource allocation and market structures, spurring local economic development, attracting FDI, and diversifying industries—yet it demands rigorous management strategies to ensure long-term sustainability and stability (Chen & Chang, 2022).

In examining drivers of global relocation, Manning (2014) identifies three strategic responses—mitigate, tolerate, or relocate—based on firms’ control over cost-push factors like wage inflation, political instability, or skilled-labor shortages. Smaller firms, facing resource constraints, tend to relocate more frequently, whereas larger firms invest in risk mitigation. Gao and Ren (2020) highlight over-reliance on China and advocate a “dynamic balancing” approach through supplier diversification, alternative markets (India, ASEAN, the U.S.), and domestic capacity building, which proved valuable when COVID-19 exposed centralized-sourcing vulnerabilities. Vargas-Hernández and Vargas-González (2024) demonstrate that trade barriers, rising labor costs, and economic nationalism compel firms to evaluate infrastructure, quality standards, regulatory environments, and macroeconomic stability holistically, rather than focusing solely on cost. Yang and Chan’s (2023) study of global production networks in the mobile-phone sector shows that “China Plus One” strategies—already in use before the trade war and pandemic—help firms mitigate geopolitical risks and leverage emerging clusters like Vietnam’s Red River Delta, while maintaining multi-tiered links with Chinese suppliers.

Regarding shifts away from China, Alfaro and Chor (2023) document a 4% drop in U.S. imports from China between 2017 and 2022, alongside nearly doubled Vietnamese imports, signaling a deliberate reallocation toward geographically proximate consumer markets to reduce trade-war exposure and rising Chinese production costs. Research on “Local sourcing, embeddedness, manufacturing relocation, and firm attitudes toward the U.S.-China trade war” (2023) confirms that although trade tensions push technology and component firms to explore Southeast Asia and Mexico, the depth of their linkages to Chinese suppliers often determines relocation intent. Solingen (2025) adds that U.S.-China geopolitical conflict forces GVC reconfiguration, with sector- and strategy-specific variations in pace and scope of relocation. Finally, Wang et al. (2020) show that in China’s light-manufacturing industries, firms with stronger technological capabilities tend to upgrade in place, whereas labor-intensive, smaller firms relocate to lower-cost locations, reflecting the dual pressures of rising wages and automation potential.

Based on the survey results, “China Cost of Production” (COST) was identified as the factor with the strongest impact on the competitiveness of Vietnamese enterprises with a Beta coefficient of 0.209 and a high Pearson correlation coefficient (r = 0.623). This confirms that increasing production costs in China have become the main driving force for shifting production to Vietnam, thereby helping businesses reduce costs and optimize profits. Along with that, since 2020, the wave of production shifting from China to Vietnam has increased sharply due to pressure from rising labor costs, increasingly stringent environmental regulations, as well as the US-China trade conflict. According to the World Bank report (2023), China’s continuous increase in minimum wages and tightening of emission standards have caused many multinational enterprises to restructure their supply chains, prioritizing economies with cost advantages and political stability such as Vietnam. In this context, although Porter’s (1990) research emphasized the role of technology and innovation in enhancing competitiveness, in Vietnam, cost factors still play a key role when businesses mainly participate in processing and assembly stages—segments that are sensitive to price fluctuations.

The US-China trade war is also analyzed through two independent factors: “Supply Chain & Trade Risk” (SCTR) and “Technology Control” (TECH). Specifically, SCTR has a Beta coefficient of 0.199, although lower than the initial Pearson correlation coefficient (r = 0.628), it still clearly reflects the impact of trade conflicts on logistics disruptions, thereby promoting the restructuring of global supply chains. This situation is demonstrated by the fact that countries impose tariffs on each other, while the US’s restriction on high-tech exports to China also affects businesses’ access to technology. Meanwhile, “Technology Control” with a Beta coefficient of 0.150 and an initial correlation of r = 0.566 shows that US sanctions have created a wave of shifting high-tech production to other countries, including Vietnam. In fact, Apple has begun to move some of its iPad and MacBook production to Vietnam, while Samsung and Intel have also expanded their operations there. However, most of these new manufacturing activities are limited to assembly and cannot yet participate deeply in higher value-added stages such as design, research and component manufacturing.

In addition, the “China Plus 1” (CPO) strategy is also noted to have a positive impact on the competitiveness of Vietnamese enterprises with a Beta coefficient of 0.154. This strategy stems from the need to reduce dependence on China after geopolitical shocks and supply chain disruptions, prompting multinational corporations to diversify production locations to Southeast Asian countries. Vietnam, thanks to its advantages of young labor, competitive costs and favorable geographical location, has become an attractive “alternative destination”. However, the effectiveness of this strategy is only promoted when closely combined with fundamental conditions such as low production costs and policy stability, typically the case of Apple when expanding production in countries such as India and Vietnam. In addition, “China’s Development Orientation” (DEV) has a weak impact on the competitiveness of Vietnamese enterprises with a Beta coefficient of 0.115, reflecting the process of China’s economic restructuring towards high-tech and service industries. This shift creates an indirect opportunity for Vietnam to attract labor-intensive manufacturing industries as China gradually withdraws from these industries. However, the weak impact of DEV also shows that this opportunity is not decisive, requiring Vietnam to improve labor quality, develop supporting industries and enhance technological capacity to maintain long-term competitive advantages.

Finally, “COVID-19 pandemic” is analyzed as a factor with a short-term promoting impact on the competitiveness of Vietnamese enterprises. Although COVID-19 has disrupted supply chains and reduced global demand, it has mainly exposed the risks of a concentrated production model in one country, thereby promoting a wave of shifting part of production activities to Vietnam to ensure supply chain continuity. However, the impact of COVID-19 is not as sustainable as other structural factors such as production costs and technological capabilities, as businesses still face challenges in supply chains and global competition in the context of economic uncertainty. In particular, the correlation between supply chain risks and the “China Plus 1” strategy (r = 0.468; p < 0.01), the significant relationship between production costs (COST) and China’s development orientation (DEV) (r = 0.462; p < 0.01), and the relationship between the COVID-19 pandemic and the US-China trade war (r = 0.468; p < 0.01) are all explained, demonstrating the complexity and reciprocal influence of factors in the context of global production shift.

The findings should be interpreted as statistical associations observed in the survey sample rather than as evidence of causal effects. The regression results indicate that Chinese production costs, post-pandemic business adjustment, supply chain and trade risks, and technology control were positively associated with reported enterprise competitiveness in the overall analysis, subject to the relevant statistical significance levels. These relationships reflect respondents’ assessments and the patterns observed in the collected data; they do not establish that production relocation from China directly caused improvements in enterprise competitiveness.

Several limitations should be acknowledged. First, the use of purposive non-probability sampling may have introduced respondent-selection bias, as participating enterprises may differ systematically from enterprises that did not respond. Second, the geographical concentration of the sample in Northern Vietnam may limit the extent to which the findings can be generalized to SMEs in Central and Southern Vietnam. Third, the use of a single questionnaire to measure multiple constructs may give rise to common-method bias, potentially inflating observed associations. Fourth, omitted enterprise- and industry-level characteristics, such as firm size, ownership structure, manufacturing subsector, technological capability, export orientation, and participation in global value chains, may also be related to the reported outcomes.

Furthermore, enterprise-level questionnaire responses cannot, on their own, establish changes in Vietnam’s national competitive position in global supply chains. The study provides evidence on how surveyed enterprises perceive and experience factors associated with production relocation from China, rather than a direct measurement of national competitiveness or a causal estimate of the effects of relocation. Future research could address these limitations through broader sampling across regions and industries, multiple data sources, longitudinal observations, and objective indicators of enterprise and national competitiveness.

This study has systematized and expanded the theoretical basis of global production shift, focusing on the process of production shift from China to Vietnam. The study not only focuses on macroeconomic factors but also delves into factors that directly impact domestic enterprises, specifically production costs in China, supply chain and trade risks, technology control, the COVID-19 pandemic, the “China Plus 1” strategy and China’s development orientation. The synthesis and analysis of these factors help build a comprehensive theoretical framework, reflecting the complexity and topicality of the production shift trend in the context of modern industry 4.0. In terms of theory, the study has developed and inherited related economic and supply chain theories, while expanding the perspective by focusing on the impact of these factors on Vietnam. This helps to add a comprehensive perspective, not only stopping at analyzing the causes of production shift but also assessing the adaptability of domestic enterprises when receiving investment capital flows in production shifting from China. The outstanding new point of the research model is the integration of policy and technology factors, thereby more fully reflecting the automation trend and the impact of technology control orders in the global context. The analysis’s incorporation of the COVID-19 pandemic and geopolitical threats has also updated the theoretical picture and brought it closer to reality, which has influenced how businesses in the global supply chain are developing their strategies. In terms of practice, the study has provided a useful practical analytical framework for enterprises and economic management agencies. The actual data and regression models used have helped to clearly identify the factors that have a strong influence on the competitiveness of Vietnamese enterprises. The research results show that although production costs and supply chain & trade risks are the main factors, China’s technology control policies and development orientation have a significant impact on the trend of production relocation. Vietnamese enterprises need to identify their competitive advantages as well as the challenges that need to be overcome, such as applying advanced technology, improving the quality of human resources and improving the logistics system. To develop the competitiveness of Vietnamese enterprises, the government and policy makers need to promote infrastructure improvement, investment attraction policies and support enterprises to improve production capacity as well as develop supporting industries. At the same time, strengthening the connection between FDI enterprises and domestic enterprises will contribute to making Vietnam not only a destination for assembly activities but also gradually becoming a high value-added manufacturing center, thereby promoting the sustainable development of the economy.