This article is Part 1 of our China Plus One Series, a two-part guide for DTC founders and operators exploring how to diversify production beyond China.
In this first part, we break down why Vietnam leads as the top Plus One destination.
In Part 2, we look at how brands are putting that strategy into action across dual-market supply chains.
The China Plus One strategy helps brands balance cost, risk, and resilience by expanding production beyond China while keeping access to its vast supply ecosystem.
In 2025, Vietnam has become the top “Plus One” destination because it is close enough for component sourcing, yet cost-efficient enough to diversify exposure.
According to DHL, Vietnam’s proximity to China, improving infrastructure, and maturing manufacturing capabilities make it the top diversification choice this year.
This isn't about leaving China. It is about creating regional balance.
Smart DTC brands are building dual ecosystems that leverage China’s manufacturing precision and Vietnam’s cost flexibility to strengthen global supply resilience.
In July 2025, the United States and Vietnam signed a trade agreement that redefined tariff policy on Vietnamese exports. Effective August 7 under Executive Order 14326, the deal introduced two-tier tariff system:
“Transshipment” refers to products manufactured elsewhere but rerouted through Vietnam with minimal processing. This rule effectively closes the loophole of Chinese goods passing through Vietnamese ports without meaningful transformation, making origin verification a commercial priority, not just a compliance checkbox.
Under the 2025 U.S.–Vietnam Trade Deal, products qualify as Vietnamese origin if they meet at least one of the following tests (per Vietnam Briefing 2025):
1. Tariff Classification Change:
The finished product must fall under a different HS code from its imported inputs.
Example: imported fabric cut and sewn into shirts in Vietnam qualifies as Vietnamese origin.
2. Regional Value Content (RVC)
At least 35-40% of the product’s total value must be added within Vietnam, including labor, materials, and overhead.
Formula: RVC = [(Ex-works price – Non-originating materials cost) / Ex-works price] × 100%
To stay compliant, maintain clear bills of materials, process records, and certificates of origin. Digital traceability platforms now automate much of this documentation for DTC brands.
Chinese goods continue to face Section 301 tariffs of 7.5–25% across thousands of categories. By shifting even 30% of production to Vietnam, a mid-sized DTC brand can significantly reduce overall duty exposure while improving supply-chain resilience.
Leading brands are responding in three ways:
The goal isn’t to abandon China but to balance and build resilience.
Before diving into cost implications, review what landed costs include and how to calculate them.
A structured roadmap minimizes risk and ensures compliance from day one.
Phase 1: Supplier Discovery
Checklist
Key resource: Learn how backup suppliers can strengthen your sourcing resilience.
Phase 2: Production Testing
Validate product quality through pre-production samples and measurable standards. Implement in-line inspections during manufacturing instead of relying only on final checks. Use AQL (Acceptable Quality Level) sampling to balance inspection cost and consistency.
Brief quality framework (see our full guide):
Even with a 20% tariff floor, Vietnam remains the most balanced “Plus One” option for DTC brands.
Early movers gain priority factory access and more flexible pricing terms.
Vietnam’s manufacturing ecosystem aligns best with several high-growth DTC sectors, according to Vietnam Briefing’s 2024 report on top export industries.
Global brands are already expanding here. Nike and Adidas are among those increasing manufacturing in Vietnam to diversify supply chains and reduce exposure to Chinese tariffs.
Manufacturing diversification alone is not enough. The fulfillment model determines how fast cash returns.
Factory → Warehouse → Customer (60–90 days)
Factory → Fulfillment Center → Customer (~6 days)
For DTC brands, direct fulfillment means:
How do I prove Vietnamese origin to avoid 40% tariffs?
Maintain documentation showing an HS code change or 35–40% Vietnamese value added, including materials and labor.
How long does it take to set up manufacturing in Vietnam?
Electronics setups typically require 3–6 months. Textile and apparel production takes 6–12 months to reach export-ready quality.
Should I keep some production in China?
Yes. Most brands retain 20–30% capacity in China to leverage its component ecosystem and domestic demand.
Do I need a local entity to manufacture in Vietnam?
No. Many DTC brands work directly with manufacturers or partner platforms that manage compliance and logistics on their behalf.
The most successful DTC brands aren’t leaving China behind. They’re building regional resilience through smart diversification.
China remains the backbone of complex manufacturing and component production, while Vietnam offers cost, speed, and trade advantages.
Together, they form a complementary network that balances efficiency and resilience.
Continue to Part 2: Beyond Diversification: How DTC Brands Are Operationalizing the China Plus One Strategy.
Ready to implement direct fulfillment from Vietnam? Contact Portless to get started today.
