Payments from mid-sized U.S. companies to China saw a notable decline last year, according to recent findings. This drop is linked to the tariffs imposed on imports during the Trump administration.
A study by the JPMorgan Chase Research Institute, released on Thursday, indicated that these companies reduced their payments to China by around 20% from 2024 to 2025. This occurred even as international payments overall held steady.
The report points to a combination of a high effective tax rate of 37.4% in October 2025 and ongoing policy shifts that created uncertainty, often leading tariffs to fluctuate dramatically, at times reaching as high as 125%. This made China particularly affected compared to other significant U.S. trading partners.
Examining a sample of mid-sized firms that had at least $5,000 in payments to China during both 2023 and 2024, the analysis revealed that outflows to other Asian regions, including Southeast Asia, Japan, and India, actually increased. The authors suggested that this could be attributed to import substitution among other potential reasons.
Clark Packard from the Cato Institute shared insights on the situation, mentioning that it’s somewhat uncertain whether Chinese goods will end up being shipped to neighboring countries, modified there, and subsequently exported to the U.S. However, he suggested that such a scenario seems plausible.
He explained that if a product undergoes significant changes in a different country, it can qualify as locally produced, sidestepping certain customs duties and trade regulations.
Packard speculated that it wouldn’t be shocking if some Chinese firms decided to set up processing centers in Vietnam or elsewhere in Asia to adapt their products for the U.S. market, primarily due to tariffs being lower in those locations.
Derek Scissors, an expert on the Chinese economy at the American Enterprise Institute, highlighted shifts in import patterns, noting that there’s been an increase in goods imported from Vietnam, reflecting the transshipment of Chinese products. He argued that Vietnamese goods are clearly benefitting thanks to China’s tariffs, although there remains significant Chinese investment in Vietnam.
Scissors also pointed out that Taiwanese producers in China may easily rebrand products as coming from Taiwan, simply by adjusting the labeling or minor modifications in the production process.
Regarding the impact of tariffs, a Federal Reserve evaluation suggested they could lead to the loss of thousands of jobs each month, raising concerns about the broader economic implications.
Lastly, the JPMorgan Chase Research Institute highlighted that tariff-related outflows from mid-sized U.S. companies surged dramatically from about $100 billion per month at the beginning of 2025 to approximately $300 billion by the end of that year. This indicates a clear impact from the initial tariff increase implemented in April 2025, pushing total payments to three times higher compared to early 2025.
