The China Plus One strategy is the most important supply chain move Australian importers can make in 2026 — a practical guide to implementing dual-country sourcing with Vietnam.
For most of the past two decades, sourcing from China was simply what you did if you were an Australian importer. China had the factories, the capacity, the logistics infrastructure, and — critically — the prices. Building your entire supply chain around a single Chinese factory or region felt entirely reasonable because the risks felt remote.
2025 and 2026 changed that calculus decisively.
US tariffs of 145% on Chinese goods have disrupted global supply chains in ways that are rippling far beyond American importers. Factory capacity is being redirected. Lead times are shifting. And Australian businesses that were quietly watching from the sidelines are now actively asking: should we be doing something different?
The answer most supply chain experts — and most experienced importers — are landing on isn’t “stop sourcing from China.” It’s “don’t source only from China.” That’s the essence of the China Plus One strategy, and in 2026, it’s one of the most important supply chain decisions an Australian business can make.
The China Plus One (or “C+1”) strategy is a supply chain diversification approach where businesses retain China as a core sourcing base while simultaneously developing manufacturing capability in at least one other country.
The goal isn’t to replace China — it’s to reduce single-country dependency. By spreading production across two or more countries, businesses protect themselves against:
For Australian businesses, the timing of C+1 adoption matters. Companies that started diversifying two or three years ago are now well-positioned. Companies starting today can still capture meaningful benefits — but the urgency is higher.
Australia hasn’t been hit with the same punishing tariffs that US importers are dealing with. Australian-Chinese trade relations have actually stabilised and partially recovered since the low point of 2020–2022, with tariffs on most goods remaining at standard preferential rates under the China-Australia Free Trade Agreement (ChAFTA).
So why should Australian businesses care about a strategy originally driven by US tariff concerns?
Because the global trade disruption doesn’t stay neatly in US-China corridors. When the US imposes 145% tariffs on Chinese goods, several things happen simultaneously:
Chinese factories that were producing for US customers suddenly have excess capacity — and begin aggressively competing for Australian and European orders, often at lower prices.
Global shipping lanes and freight capacity are disrupted as trade flows reorganise around the new tariff regime.
Factories in Vietnam, India, and other emerging manufacturing countries get flooded with enquiries from global brands — meaning lead times lengthen and capacity tightens for those who haven’t already established supplier relationships.
Australian businesses that sell into global markets — or aspire to — increasingly need to demonstrate supply chain diversification to retail partners, investors, and export programs.
The businesses winning in this environment are the ones that treated supply chain resilience as a strategic priority before it became an emergency.
When Australian importers explore China Plus One options, Vietnam comes up first in almost every conversation — and for good reason. It’s not just proximity. Vietnam has a uniquely strong case as a manufacturing destination for Australian businesses specifically.
Australia and Vietnam are both signatories to the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), which provides preferential tariff rates on a wide range of goods. For certain product categories, this means Vietnamese-manufactured goods enter Australia at 0% tariff — a significant cost advantage over goods with Chinese origin, which still attract tariffs in some categories.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) also includes both countries, providing further tariff reductions and intellectual property protections.
Vietnamese manufacturing wages range from approximately USD $200–300 per month, compared to USD $500–800 in China’s eastern manufacturing hubs. For labour-intensive products — furniture, garments, bags, footwear, light assembly — this wage gap translates directly to lower FOB costs.
Total manufactured cost comparisons vary significantly by product type, but for many categories, finished goods from Vietnam are 15–35% cheaper than equivalent Chinese production on a landed-cost basis when tariff advantages are factored in.
Vietnam is no longer a “low-cost only” play. Its manufacturing sector has matured significantly, with genuine depth across:
For a deeper look at what Vietnamese factories can produce for Australian importers, see our Vietnam sourcing page and our Vietnam supplier directory.
One of Vietnam’s underrated advantages is its physical proximity to China. Many Vietnamese factories source raw materials and components from China — meaning the supply chain is complementary rather than a full replacement.
Vietnam has maintained strong GDP growth — around 6–7% annually — through periods of global volatility that destabilised other emerging manufacturing economies.
Vietnam isn’t the only China Plus One destination being considered. Here’s how it compares to the most common alternatives for Australian importers:
| Vietnam | India | Thailand | Indonesia | |
|---|---|---|---|---|
| Trade agreements with AU | AANZFTA, CPTPP | ECTA (2026) | ASEAN-AU-NZ | ASEAN-AU-NZ |
| Labour cost | Low–medium | Low | Medium | Low–medium |
| Manufacturing maturity | High (select sectors) | High (diverse) | Medium-high | Medium |
| Best for AU importers | Furniture, apparel, electronics, bags | Textiles, engineering, wellness, steel | Automotive parts, electronics | Furniture, palm-oil products |
India deserves a special mention in 2026: the Australia-India ECTA, which came into full effect in January 2026, now provides 0% tariffs on 100% of Indian goods entering Australia.
Strong fit for Vietnam: Furniture and homewares, apparel/footwear/bags, outdoor and travel products, simple electronics and accessories, packaging and labels, candles and lifestyle products.
Moderate fit: Sporting goods and gym equipment, baby products and toys, pet accessories, light industrial and tools.
Weaker fit — China typically still preferred: Complex electronics, precision engineered components, pharmaceuticals and chemicals, products requiring very large-scale manufacturing.
Quality inconsistency across factories: Your new Vietnam factory is starting from scratch. Budget for extended sampling, tooling investment, and quality ramp-up time.
Split inventory complexity: Running two supply chains doubles your administrative burden.
Country of origin compliance: Ensure your Vietnam-made products genuinely meet rules-of-origin requirements.
Capacity constraints in Vietnam: Lead times can extend significantly during peak demand periods.
For businesses that want supply chain management support across both China and Vietnam, Epic Sourcing’s supply chain management service is designed for exactly this scenario.
Epic Sourcing operates teams in both China and Vietnam, giving our clients direct on-the-ground support in both markets from a single coordinated partner.
Book a free discovery call with our team to discuss your China Plus One options.
