US businesses shift away from China under Trump tariffs

Core Insights - Payments made by U.S.-based midsize businesses to firms in China dropped by approximately 20% from 2024 to 2025 due to increased tariffs on Chinese imports under the Trump administration [1][2] - The effective tariff rate on Chinese imports reached 37.4% in October 2025, making China the most affected among major U.S. trade partners [2] - Monthly tariff payments by midsize U.S. businesses tripled from nearly $100 billion in early 2025 to about $300 billion by the end of 2025, indicating a significant increase in costs due to tariffs [14][15] Payment Trends - Midsize firms that previously made payments to China redirected their outflows to other parts of Asia, including Southeast Asia, Japan, and India [3] - The increase in outflows to these regions may be attributed to import substitution, although other factors could also be influencing this trend [3] Tariff Impact - The sharp increase in tariff payments began in April 2025, coinciding with the implementation of the first tariff rate increases of that year [15] - The total payments continued to rise throughout 2025, reaching levels three times higher than those recorded in early 2025 [15] Transshipment Concerns - There are indications that Chinese products may be shipped to neighboring countries, modified, and then sent to the U.S. to circumvent tariffs [5][7] - Rising imports from Vietnam and Taiwan are seen as potential sources of transshipped goods, with Taiwanese producers possibly rerouting goods to avoid high tariffs on Chinese products [10][11]