The devices we rely on most — smartphones, laptops, tablets, and other smart accessories — share a common thread that is often invisible to the average consumer: the vast majority of them are manufactured, or at least assembled, in China. This fact, long accepted as a byproduct of globalization, has recently come under renewed scrutiny as U.S.-China trade relations have soured. With the U.S. economy, workforce, and education system increasingly dependent on affordable, high-quality consumer technology, the financial consequences of tariffs are at the forefront of the minds of company executives and investors alike.
President Trump’s revived tariff policies have placed fresh strain on an already sensitive U.S.-China trade relationship. The proposed tariffs, aimed at reshaping American reliance on Chinese manufacturing, would have significant implications for the world’s largest tech companies, many of which are deeply connected to China’s sprawling manufacturing ecosystem. Tariffs on other Southeast Asian countries are a concern as well, as final assembly of goods often happens in places like Vietnam to bypass higher trade costs with the U.S., even though many core components are manufactured in China. Although electronics have so far been spared the full brunt of the 145% retaliatory tariffs on China, the uncertainty hanging over the supply chain will make it increasingly difficult for companies to plan, price, and deliver consumer products at the scale and speed American consumers expect.
China’s Grip on Electronics Manufacturing
The tech world’s dependence on China isn’t breaking news, but it’s often underestimated just how deeply entrenched this relationship has become. Over the last three decades, China has done more than offer cheap labor — it has built a vast, highly specialized manufacturing ecosystem tailored to the demands of modern electronics. Since the 1980s, China’s economic reforms and the creation of Special Economic Zones like Shenzhen — a hub for iPhone manufacturing — have attracted waves of foreign investment. These zones offer tax breaks, modern infrastructure, and regulatory flexibility, making China the go-to destination for labor-intensive manufacturing.
China’s building of a manufacturing base and expanding it to take on increasingly complicated projects is not an accident. Early on, the Chinese government recognized the leverage they could gain on a global scale if they became a manufacturing and export hub. Subsidies and incentives for manufacturers were plentiful, and businesses came in droves to take advantage of cheap supply chains. Today, the government not only supports manufacturing but supports companies across the country more broadly. In fact, 99% of publicly listed Chinese companies receive some form of subsidy each year. The breadth of state support — ranging from tax incentives to subsidized workforce training — gives China a significant upper hand in luring outsourced manufacturing operations. This level of support makes it difficult for other emerging market economies to compete with China, while also giving China’s more advanced companies the extra firepower they need to try to compete with more sophisticated competitors in foreign markets.
China’s manufacturing is also globally dominant because of its logistical efficiency. The country’s factories can source batteries, screens, and sensors from nearby storage facilities and ship finished products globally with minimal lag. This responsiveness allows companies to iterate quickly and launch products on tight schedules. For example, Apple designs its products in California and sources chips from Taiwan but still assembles over 90% of its iPhones in China due to the close proximity of necessary components for final assembly. Chinese manufacturers are flexible and capable of last-minute design tweaks that would cause delays in less coordinated systems.
Replicating China’s infrastructure and supplier network is a massive challenge. Decoupling from China is not something that will be done easily or quickly — if indeed it happens at all. Tariffs would need to be both high and permanent for companies like Apple to seek lasting alternatives to Chinese manufacturing.
Tariffs Threaten Consumer Electronics
President Trump’s goal for tariffs is twofold: to protect American industries from perceived unfair competition and to encourage U.S. companies to rethink their reliance on Chinese supply chains. On paper, the logic appears straightforward: if Chinese-made goods become more expensive, American firms will have no choice but to move production elsewhere.
The reality, however, is far more complex. Tariffs don’t automatically lead to domestic production. In the short term, they tend to raise costs for consumer tech importers, forcing businesses to make tough decisions: absorb the additional expense or pass it on to consumers through higher prices. While absorbing the cost sounds preferable, it often comes at the expense of layoffs and reduced economic output. For companies that thrive on razor-thin margins — especially in the hyper-competitive world of consumer electronics — neither option is attractive.
American households, which have grown accustomed to the relative affordability of smartphones, laptops, and tablets, are likely to feel the pinch first. The same iPhone or Galaxy device you bought last year could see its price jump by hundreds of dollars if tariffs on Chinese imports escalate. However, the extent of that price hike will ultimately depend on the tariff rates placed on countries like Vietnam and India. If the gap between those countries’ rates and China’s is significant — say 10% compared to 60% — then consumer tech companies are more incentivized to move manufacturing out of China and absorb the extra costs associated with relocating.
However, even relocating carries risks. Today’s tariff rates may not be the tariff rates of the future, so it’s difficult to justify significant upfront spending to relocate. The alternative, of course, is to bring manufacturing home. Building a factory in the United States ensures there won’t be any tariffs on final assembly. Unfortunately, manufacturing at home is likely cost-prohibitive. The U.S. has long outsourced final assembly to China in order to focus on other parts of the supply chain like innovation and design. Today’s workforce does not have the skills to do high-precision manufacturing, nor would it be a good allocation of skilled resources. Using survey data from the Cato Institute, the Financial Times reported that while 80% of Americans believed the U.S. would be better off if more people worked in manufacturing, fewer than 30% believed they personally would be better off. This major gap between personal and societal perspectives underscores the reality that the U.S. has evolved into a primarily services-based economy.
Tariffs Mean Electronic Components Will Cost More Too
Additionally, what makes the smartphone and PC supply chain so challenging to unwind is its sheer complexity. Tariffs don’t just hit the final product. When imposed broadly, they also affect the flow of raw materials and intermediate goods, which can make even components manufactured outside China more expensive once they enter the Chinese assembly line.
While the final assembly of a device like an iPhone or Dell laptop may take place in China, its individual components are sourced from all over the world. The processor might be designed in California by Apple or Intel but fabricated in Taiwan at TSMC’s massive chip foundries. The display could be produced by South Korea’s Samsung or LG — or increasingly, China’s BOE. Memory chips often come from companies like SK Hynix or Micron, which manufacture across the U.S., South Korea, and Japan.
Even the smallest components — like resistors and capacitors, which are critical to controlling electrical currents in smartphones — often have winding production journeys that cross multiple borders numerous times before final assembly. Once these parts arrive in China, factories integrate them into a finished product, and the complete device is then packaged and shipped out. This intricate, interdependent system keeps costs low, lead times short, and quality high — but it also means any disruption, such as tariffs or sanctions, can cause cascading effects across the industry.
Simply moving final assembly from China doesn’t change the fact that all of the other components needed for final assembly are also being sourced from elsewhere. Unless we move the entirety of the supply chain to the United States, it’s likely that some components will end up facing tariff disruption of some sort.
If Not Made in China, Then Where?
President Trump’s tariffs have also laid bare the fault lines in global electronics production. Companies with deeply embedded Chinese operations face the harshest risks, while those that began diversifying early are positioned to capitalize on the disruption. Countries like Vietnam and India have emerged as alternative production hubs, especially for labor-intensive assembly work. Vietnam has steadily climbed the ranks in smartphone and wearable device manufacturing — particularly for lower-end models — but still doesn’t come close to China’s share of the market. India, on the other hand, has increasingly become a destination for high-end electronics, including iPhones.
Interestingly, in an attempt to sidestep potential tariffs, Apple’s suppliers in India reportedly shipped nearly $2 billion worth of iPhones to the U.S. in March alone — a clear signal of how seriously technology companies are taking the risk of higher costs. It’s worth noting that China’s exports of finished consumer electronics products have exceeded all other countries combined for more than 15 years. China’s share has remained well above 50%, while Vietnam hovers around 10% — a far cry from posing an immediate threat to China’s dominance.
Yet shifting production comes with trade-offs: fewer supplier options, higher costs for some components, and slower turnaround times during periods of high demand. While companies are beginning to rethink their strategies, China’s deep-rooted ecosystem will be difficult to replace entirely, especially for sophisticated products like smartphones and laptops.
Investment Opportunities Amid Tariff Uncertainty
For investors, the U.S.-China tensions present both risk and opportunity. Sharp tariff hikes can spark short-term stock market volatility, but they also open the door for long-term investment themes. American companies that face rising production costs due to tariffs may also benefit from federal subsidies and policy incentives aimed at bringing manufacturing back home — there are two sides to every coin.
Semiconductor companies like Intel (INTC), AMD (AMD), and Micron (MU) are clear examples. These firms not only have less exposure to Chinese assembly but are poised to benefit from government-backed efforts like the CHIPS Act. Intel, despite past operational challenges, has received significant U.S. government backing to expand its domestic manufacturing footprint.
Investors should also consider companies that enable advanced domestic production. Equipment suppliers like Applied Materials (AMAT) and Lam Research (LRCX) stand to benefit from the buildout of domestic semiconductor capacity, as their expertise in fabrication equipment is essential for next-generation chip architecture. Flex Ltd. (FLEX), which offers contract manufacturing outside China, may also benefit from a reorganized supply chain that needs short-term flexibility. Finally, firms specializing in automation and robotics could see a surge in demand, as companies seek to offset higher domestic labor costs with increased factory automation if onshoring comes to fruition.
Future Of Consumer Electronics
As tariff tensions escalate, the future of affordable consumer technology hangs in the air. For decades, affordable devices have been the result of a highly efficient, globally integrated supply chain — one that relies heavily on China’s vast manufacturing infrastructure. Disrupting this system with tariffs introduces friction into everything from production timelines to component sourcing and risks higher costs for consumers.
Investors should keep in mind that replicating China’s scale and expertise in manufacturing is a multi-decade undertaking. The era of cheap, seamless access to the latest technology may be giving way to a new normal — one where national security concerns and political agendas increasingly influence the affordability of consumer technology.