For SanMar (asi/84863), the change truly started in 2018.That’s when the promo industry’s largest supplier began a concerted effort to migrate considerable volumes of its apparel production out of China to factories in other nations.
Nowadays, SanMar sources products from more than 20 countries, a cross-continental approach aimed at ensuring supply chain resiliency and flexibility. The Issaquah, WA-headquartered firm selects each production destination for its unique advantages, such as strategic location, trade benefits or specialized capabilities.
“We expect to further diversify our supply chain network because sourcing decisions are often driven by U.S. trade policy and, as policy changes are made, sourcing will adjust accordingly,” says Dean Draughn, SanMar’s vice president of sourcing and product development.
SanMar’s efforts place the firm at the forefront of a notable industry trend: Suppliers are increasingly trying to geographically broaden their supply chains, importing from more countries than just China.
Percentage of Suppliers Who Import From China
(Among those who import)
We asked suppliers: In the last 12 months, have you actively explored new countries for sourcing of products due to uncertainty about the trade situation with China?
(Percentage of respondents who “Strongly Agree”)
It’s a movement that saw its initial steps less than a decade ago and then picked up speed first with the tariffs brought on by President Donald Trump in his first term, then again with the supply chain disruptions and production shutdowns in China during COVID.
“Tariff price pressure is pushing companies to look elsewhere than China for more affordable options.”Jing Rong, HPG (asi/61966)
As relative normality returned, some complacency crept in within promo sourcing. But not anymore. Trump’s sweeping second-term tariff agenda, which most prominently featured higher import duties on China, has reignited a push by suppliers to move more manufacturing out of China and find additional production partners.
Such sentiments are reflected in Counselor’s State of the Industry findings. Last year, among suppliers, 85% said they import from China – a nine percentage point drop since 2021. And more than a quarter of suppliers said they were exploring alternatives to China – again the highest figures in three years.
“The roller coaster has accelerated our efforts to diversify our supply chain,” says Yuhling Lu, CEO/co-owner of Counselor Top 40 supplier Ariel Premium Supply (asi/36730) and a member of Counselor’s Power 50 list of promo’s most influential people. “The acceleration is primarily driven by tariffs from the current administration. These rates aren’t sustainable.”
HPG (asi/61966), a Counselor Top 40 supplier, began diversification efforts in early 2022. Even before the recent spike in tariffs, the firm anticipated tensions between the U.S. and China could escalate and began making moves. That’s now ratcheted up. “Tariffs are definitely part of the reason, but we’re also thinking long-term about stability, flexibility and reducing overdependence on any one region,” says Jing Rong, HPG’s vice president of supply chain and sustainability.
Having Options
In 2024, China remained the primary foreign country from which domestic suppliers sourced, but industry firms increased their sourcing from a variety of countries, including Mexico, India, Bangladesh and Thailand. Certain nations have become more attractive production hubs due to lower tariff burdens, less expensive labor and their relatively close proximity to China, with its raw materials and logistical resources. “We have facilities in China and it’s easy for the team to reach Southeast Asian countries in less than six hours,” says Trevor Gnesin, CEO of Logomark (asi/67866). “It makes sense to look there.”
Where Suppliers Import Products From
Still, shifting supply chains doesn’t happen overnight. It can prove a lengthy process that has to take into account costs, logistics, production capabilities, environmental impacts and worker conditions, as well as the types of items being produced. It’s easier to move manufacturing of certain products, such as apparel, bags and journals.
“Categories like plastic goods, textiles and other basic items are also increasingly being sourced from places like Southeast Asia and India,” says Rong. “These products don’t require the same level of infrastructure or supply chain complexity that China excels at, making them easier to shift elsewhere.”
However, some promo executives assert it’s much harder to produce certain categories at scale in a cost-effective manner outside of China, such as tech products, electronics and stainless-steel drinkware. “We’ve increased efforts to diversify our supply chain due to tariffs but it’s more difficult to do with hard goods in the promo space,” says Counselor Power 50 member Trevor Gnesin, CEO of Counselor Top 40 supplier Logomark (asi/67866).
A Matter of Import
When it comes to new countries from which to source products, promo suppliers are generally keeping their eyes fixed on Asian nations. “We expect to increase imports from a range of countries across Southeast Asia – like Cambodia, Vietnam and Thailand – and also from India,” says Jing Rong of HPG (asi/61966). “Each of these regions brings something different to the table, and together they help us spread out risk and build a more balanced supply chain.” Trump’s tariff strategy, however, is forcing companies to reconsider their options. Since the beginning of the year, Mexico as an anticipated sourcing hub declined seven percentage points, and less-popular “Other” choices increased 10 percentage points.
Where Suppliers Anticipate Increasing Imports From in Next 3 Years
Executives note that it can often be the case that even if products are manufactured in a nation outside China, the raw materials needed to make the items may still come from China. “Asia,” says Lu, “has become an assembly hub but many materials are still Chinese.”
Further shifts in U.S. trade policy could well influence how much future promo production stays in or leaves China, executives say. Some believe regardless of tariffs, China will remain the merch market’s primary sourcing partner, even as a growing percentage of manufacturing may continue to move away from the nation to places like Vietnam, Mexico, India, Bangladesh and Turkey.
“There are some popular product categories that require specialized manufacturing processes that can’t be easily, quickly or cost effectively transplanted to another country,” says Lu.
Gnesin believes that’s especially true of many hard goods, and because of that, “it will take decades to reach what China has achieved.”
Even so, not everyone’s convinced China’s place is assured.
“China will still be an important center for promo manufacturing, but probably not the primary one anymore,” opines Rong. “With our industry’s strong focus on low-cost goods, the rising tariffs create a serious challenge. That kind of price pressure is pushing companies to look elsewhere than China for more affordable options.”
Feeling Left Out
About half of suppliers say that distributors buying products directly from overseas vendors presents a threat to their businesses. Critics of the practice say it erodes promo’s long-standing sourcing model. When distributors send large orders overseas in growing numbers, that can negatively affect suppliers’ ability to invest in the inventory and service levels distributors expect on smaller “everyday” orders, the reasoning goes. Still, some suppliers think distributors may find direct sourcing increasingly challenging given tariff-impacted global trade, especially if they seek sources beyond China. “Minimum quantities will be much larger, lead times will be longer and shipping costs will be higher because the logistics aren't as strong,” says Yuhling Lu, CEO of Ariel Premium Supply (asi/36730).