US businesses shift away from China under Trump tariffs

• Payments from U.S. midsize firms to China fell 20% year-over-year even as overall international payments remained steady, with China's effective tariff rate reaching 37.4% in October 2025
• Trade flows shifted to other Asian regions, with experts noting potential transshipment concerns particularly from Vietnam and Taiwan, where Chinese goods may be relabeled or minimally processed before U.S. export
• Monthly tariff payments by midsize firms surged from $100 billion in early 2025 to approximately $300 billion by year-end, tripling the cost burden following tariff implementation in April 2025

Summary: US Businesses Shift Away from China Under Trump Tariffs

Key Findings

A JPMorgan Chase Institute report reveals significant changes in U.S.-China trade patterns, with payments from U.S. midsize businesses to Chinese firms declining 20% between 2024 and 2025, even as overall international payments remained stable.

Tariff Impact

China faced the highest tariff burden among major U.S. trade partners, with effective rates reaching 37.4% in October 2025 according to the Penn Wharton Budget Model. Rates temporarily spiked to 125% before subsequent reductions, creating substantial policy uncertainty.

Trade Diversion

Midsize firms with existing China relationships redirected outflows to alternative Asian markets, including Southeast Asia, Japan, and India. Experts suggest potential transshipment activity, where Chinese products may be routed through countries like Vietnam and Taiwan for final processing or relabeling before entering the U.S., thereby avoiding higher Chinese tariffs.

Expert Analysis

Trade policy experts note that as long as products undergo "substantial transformation" in intermediate countries, the practice doesn't constitute illegal transshipment. Derek Scissors of the American Enterprise Institute highlighted significant Chinese investment in Vietnamese consumer goods production and noted Taiwanese producers could easily reroute China-made goods through Taiwan.

Financial Impact

Monthly tariff payments by midsize firms tripled from approximately $100 billion in early 2025 to roughly $300 billion by year-end, coinciding with April 2025 tariff rate increases.

Market Implications

The data confirms a substantial restructuring of U.S.-China supply chains, with businesses adapting to tariff pressures through supply chain diversification and potential trade routing strategies, significantly impacting regional trade flows across Asia.