For many Americans hoping to start a side hustle or small business that sells a physical product, finding a manufacturer is an important early step.
YouTube and TikTok queries often point them to a common destination: China. The country’s well-established manufacturing infrastructure has a wide array of factories large and small, corporate- and family-owned, often with low costs of labor and materials.
A wide variety of U.S. side hustlers and small-business owners — people selling car accessories, diaper bags, even guinea pig cages — have found success manufacturing their products in China. But tariffs may make it more expensive, or at least more complicated, to emulate that success, some entrepreneurs say.
President Donald Trump’s 20% levy on incoming Chinese goods took effect last week, up from 10% last month. That tariff is likely to stay in place, despite the uncertain status of other tariffs proposed by the Trump administration — and a growing number of American small-business owners are considering relocating their manufacturing to countries like Cambodia or Vietnam to avoid passing on costs to their consumers.
More than 90% of North American manufacturers relocated at least some of their production away from China between 2018 and 2023, a Boston Consulting Group report found. More businesses than ever are accelerating plans to diversify their manufacturing sources, according to a recent survey from the nonprofit American Chamber of Commerce in China.
“The expenses have already started,” says Kim Vaccarella, founder and CEO of Secaucus, New Jersey-based beach tote company Bogg Bag. “If we’re going to move to another manufacturer in a different country, we want to make sure everything down to the temperature of the material is the same. We have to be conscious of the humidity, the machinery, the weather.”
Bogg Bag intends to find a new factory, after working with the same Chinese manufacturer since 2014, Vaccarella says. She’s vetting options in Vietnam and Sri Lanka, but shifting her company’s production to a new country won’t be simple, she says: Changing manufacturers means making new molds with new machinery, and training new people to handcraft the product’s final elements.
Ensuring any new bags are identical to the Chinese-made ones will take time, says Vaccarella.
A ‘classic’ reaction to tariffs—with pros and cons
No single country will likely dethrone China as the world’s go-to manufacturer, says Benjamin Jones, an entrepreneurship and strategy professor at Northwestern University’s Kellogg School of Management.
But for side hustlers and business owners, moving your company’s manufacturing to avoid tariff costs is a “classic strategy,” Jones says: Plenty of businesses switched up their manufacturers after President Trump enacted tariffs on imported Chinese goods in 2018, and experienced both pros and cons along the way.
Entrepreneurs and CEOs have a chance to diversify multiple parts of their business, from selling additional products to the countries they want to sell in, says Jones. Companies can also cut costs, and potentially avoid future tariffs, by manufacturing some products in one country and other products in another, he notes.
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On the other hand, a big change like a sudden increase in tariffs “scrambles the playing field,” he says — pressuring companies to make business-altering decisions quickly. Business owners may have to learn new laws and regulations when they move their manufacturing to a new country, and ensuring that a new factory can replicate the old one’s products, communication and shipping times often takes time, money and experimentation.
New York-based apparel company Naadam feels that pressure, says co-founder and COO Diederik Rijsemus.
Naadam sources wool from Mongolian herders, and ships it to a group of three Chinese factories to process the material and turn it into sweaters. It primarily sells its $98 cashmere sweaters to a customer base of 18- to 35-year-olds, Rijsemus says — a demographic he expects would balk at price increases.
Like Bogg Bag, Naadam plans to find a new factory elsewhere. Tariffs “are a bit of a dark cloud that hangs over our head,” says Rijsemus.
Multiple ways to tariff-proof a business
Not every expert agrees that tariffs will negatively impact small businesses, or raise prices for American shoppers.
Business owners have plenty of options for skirting tariffs, says Jeffrey Roach, chief economist at financial advisory LPL Financial. They can work with lawyers to apply for tax exemptions, or negotiate with Chinese factories who may be willing to lower prices to hang onto business, Roach says.
Even Vaccarella sees a potential upside for small businesses: If knockoff brands on marketplaces like Temu or Amazon also have to raise prices in response to tariffs, they could lose some appeal to penny-pinching customers, she says.
But figuring out how to tariff-proof your business or side hustle can take energy that some entrepreneurs don’t have, particularly those who either work alone or with a small team.
Matt Rollens, for example, runs Granite Bay, California-based novelty drinkware company Dragon Glassware with three full-time employees. He doesn’t have the time or resources to figure out how to get another factory to perfectly recreate the products he already sells, he says.
Instead, he’s trying to negotiate new prices with his Chinese manufacturer, and he’s testing potential new products with factories in different countries, he says. Either way, he’s projecting additional costs for Dragon Glassware, and raising consumer prices will only cover a portion of the difference, he says.
“This is the biggest existential issue I’ve ever faced,” says Rollens. “I spent a year just testing factories before I launched my company [in 2017]. I’m just one guy.”
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