"Following the implementation of tariff rate increases and new universal tariffs in April 2025, monthly tariff payments by these midsize firms have tripled compared to early 2025 levels. Decoupling is Happening If the primary objective of the trade policy was to reduce American reliance on Chinese manufacturing, the banking giant's data suggests the strategy is working. Outflows from midsize U.S. firms to China have dropped by approximately 20% since 2024."
"Instead of reshoring operations entirely, American businesses appear to be engaging in a costly game of musical chairs. The report finds that while payments to China fell, outflows to other regions-specifically Southeast Asia, Japan, and India-have accelerated. This evidence points to "import substitution," where U.S. firms rush to find alternative suppliers in friendly nations to bypass the steepest levies placed on Beijing."
Aggressive tariff rate increases and new universal tariffs in April 2025 have tripled monthly tariff payments for midsize U.S. firms relative to early 2025, sharply increasing import costs. Outflows from these firms to China have declined roughly 20% since 2024, while payments to Southeast Asia, Japan, and India have accelerated as firms seek alternative suppliers. Trade volumes have remained broadly stable even as sourcing shifts away from China, indicating import substitution rather than full reshoring. Midsize companies are absorbing higher tariffs and supplier-switching costs, creating financial strain and raising risks to middle-market profitability and balance sheets.
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