China’s Manufacturing Diaspora: The ‘20% Tax’ Redrawing Global Trade

The era of seamless globalisation appears to be fracturing, replaced by a more fragmented and expensive trading environment. According to Victor Fung Kwok-king, a veteran of the global supply chain industry, the world is rapidly converging towards a baseline tariff rate of approximately 20 per cent on most goods. Speaking at the Global Supply Chain Business Summit 2025, Fung warned that this shift represents a de facto "20 per cent tax" that will ultimately be borne by the end consumer.

As protectionist policies resurface, most notably with the Trump administration re-embracing tariffs to rebalance trade, the implications for global capital markets are profound. While major economies like China and India remain outliers in certain respects, the trajectory suggests a structural shift in inflation and consumer demand. Fung notes that as these added costs work their way through the system, the impact on pricing and trade volume will be fully felt "probably within one or two years".

The economic data supports this grim outlook on trade friction. Recent findings from the World Trade Organization reveal that between mid-October 2024 and mid-October 2025, new tariffs affected imports worth US$2.64 trillion. This figure represents 11.1 per cent of total global imports and is more than four times the US$611 billion recorded in the preceding period.

For investors, this signals a potential disruption to the disinflationary trends of the past decade. If companies can no longer absorb tariff costs, they must pass them on, shifting the demand curve downward. This creates a challenging environment for central banks; fighting inflation caused by supply-side tariffs is notoriously difficult without stifling economic growth. As the "20 per cent tax" feeds through to retail prices, consumer discretionary sectors could face headwinds, while firms with localized supply chains may find themselves at a competitive advantage.

The geopolitical turmoil is also forcing a physical reconfiguration of global production. William Fung Kwok-lun, deputy chairman of the Fung Group, describes the current trend as "the beginning of a diaspora of manufacturing" from China. despite a tentative one-year truce between Beijing and Washington, the unpredictability of trade tensions remains a significant cloud over the market.

Chinese manufacturers are actively moving production capabilities to Southeast Asia, the Middle East, and the Global South to bypass tariff barriers. This migration is not merely a logistical adjustment but a strategic capital deployment. Hong Kong is positioning itself as the critical interface for this transition. Algernon Yau, Secretary for Commerce and Economic Development, highlighted the "GoGlobal Task Force," a initiative designed to support mainland enterprises as they expand their international footprint via Hong Kong’s financial and legal infrastructure.

The reconfiguration of supply chains presents both risk and opportunity. The "diaspora" of manufacturing requires massive capital investment in infrastructure across emerging markets, potentially boosting industrial equities in those regions. Conversely, the increased friction in global trade suggests that multinational corporations may face margin compression.

Investors must now account for a higher cost of doing business globally. The warning from industry leaders is clear: the tariff regime is not a temporary anomaly but a new structural reality. As the cost of goods rises, the focus will likely shift toward companies with strong pricing power and resilient, diversified supply networks that can navigate a world where a 20 per cent premium is the new standard.