Tariffs imposed by U.S. President Donald Trump disrupted Chinese manufacturing in 2025, but an electronics producer in southern China says the turbulence has reinforced the country’s role as a difficult-to-replace production base, even as companies diversify operations abroad.

Agilian Technology, a Dongguan-based firm supplying mainly Western brands, saw U.S. orders accounting for more than half its revenue frozen for months during the escalation of trade tensions. Clients pushed the company to establish production capacity outside China as tariff risks mounted.

The volatility reflected broader disruption across China’s industrial sector, where official purchasing managers’ index readings contracted for much of 2025, reaching their weakest level in April since December 2023. The downturn coincided with successive tariff hikes targeting Chinese exports, which triggered order cancellations and inventory buildups across export-oriented manufacturers.

Executives at Agilian said customers initially rushed to ship goods ahead of tariff deadlines, filling warehouses across North America and driving up storage costs. Following the re-election of Donald Trump, uncertainty intensified, with clients placing urgent calls and exploring alternative production bases in Southeast Asia.

Two rounds of tariff increases early in the administration, totalling 20%, raised concerns but did not immediately shift production. However, a further escalation in April, which added 34 percentage points to tariffs on Chinese goods, prompted widespread cancellations. Goods accumulated inside Agilian’s 12,000-square-metre facility as orders stalled.

China’s response, including export controls on key minerals and metals used by U.S. industries, contributed to a rapid escalation in trade barriers, with tariffs exceeding 100% on both sides before easing later in the year. Company executives said the period effectively froze cross-border trade flows.

Beijing’s countermeasures also altered market dynamics. By March 2026, China’s official PMI expanded at its fastest pace in a year, suggesting a recovery in industrial activity. Economists attributed this resilience to the reconfiguration of global supply chains rather than a reversal of tariff policies.

Nick Marro of the Economist Intelligence Unit said the tariff measures had reshaped trade linkages rather than undermined China’s manufacturing base, pointing to continued output growth despite disruptions.

Official data showed China’s trade surplus reached $213.6 billion in the first two months of 2026, up from $169.21 billion a year earlier. In 2025, the surplus rose by about 20% to a record $1.2 trillion, highlighting sustained export strength even as shipments to the United States declined.

Agilian’s chief executive, Fabien Gaussorgues, said exports to the U.S. fell by around 20% in 2025, reflecting reduced demand from American buyers affected by tariffs. The company began pursuing alternative production strategies, including partnerships in Penang, Malaysia, and exploring industrial space in Dharwad, India.

The firm had already established a legal entity in India, but operational challenges slowed progress. Gaussorgues said regulatory processes and production timelines extended beyond client expectations, while some customers expressed concerns over customs delays.

Efforts to relocate production to the United States were also examined, but incomplete domestic supply chains and higher labour costs limited feasibility, leaving manufacturers reliant on Chinese components that remained subject to tariffs.A temporary easing of trade tensions following a Washington-Beijing agreement in May led to the removal of most tariffs imposed earlier in the year.

However, subsequent U.S. measures, including a 50% tariff hike on India in August tied to its energy trade policies, complicated diversification efforts.Agilian continued developing its overseas footprint despite shifting policy signals. Pre-production runs in Malaysia revealed longer setup times compared to China, reinforcing the logistical advantages of its established base in Dongguan.

China’s export controls during the summer exposed dependencies in U.S. industries on materials processed predominantly in China, affecting sectors including automotive and defence. A meeting between Xi Jinping and Donald Trump in October resulted in a partial tariff reduction of 10 percentage points, easing pressure on manufacturers.

By the second half of 2025, Agilian reported a rebound in activity, with production hours rising 29% compared with the first half as clients resumed orders. Executives said customers appeared to accept higher tariff levels as manageable, provided further escalation was avoided.

Company officials indicated that any return to tariff levels near 100% would likely lead to renewed order freezes, underscoring continued vulnerability to policy shifts. While the firm plans to expand operations in India and Malaysia as a hedge against future disruptions, Gaussorgues said China’s combination of cost efficiency and supply chain integration remains central to its operations.

He added that the company aims to increase revenue by 30% over the next three years, although external factors, including geopolitical tensions, continue to shape planning assumptions.