Did the U.S.'s China Tariffs Reshape Global Supply Chains?
Other countries fill the gap left by China's trade
Tariffs are Trump’s tool of choice in achieving economic and foreign policy goals. Duties on Chinese imports were implemented in the first Trump administration to reduce dependence on China and the gaping US-China trade deficit. Additional tariffs on China have been implemented in recent weeks.
Research by Professor Caroline Freund and coauthors seeks to answer a critical question: what has the effect of these tariffs actually been on the U.S. trade?
Below, we show their findings based on U.S. trade data from 2017 to 2022. They reveal that while the tariffs reduced U.S. imports of key goods from China, many of the countries that filled the gap remain deeply embedded in Chinese supply chains. Manufacturing did not come back to the U.S. en masse. Instead, tariffs on China largely benefited a small number of countries like Mexico and Vietnam which took up the slack. The countries which took up China’s reduced share of U.S. imports remain highly integrated with Chinese supply chains. While dependence was meaningfully reduced, tariffs appear to have fallen short of achieving true decoupling between the world’s two largest economies, as imports from China still remain at a high level, at least for now.
Shifting Away from China, but Overall U.S. Imports Grew In Spite of Tariffs
In their paper, the researchers looked at a massive dataset of global trade and found that in key industries targeted by tariffs on Chinese goods, the share of U.S. imports coming from China did indeed fall. Taking into account all trade, China’s share of U.S. imports fell from 22% of total imports in 2017 to 16% of total imports in 2022. Despite this fall in the share of imports from China, total U.S. imports of tariffed goods from all countries continued to rise, indicating that levying tariffs has not led to a significant reshoring of American manufacturing.
Imports of All Goods
Imports of Goods Subject to the China Tariffs
Imports of Goods in Strategic Industries
U.S. imports from China is down but remain high
A Small Number of Suppliers Took Over China’s Reduced Trade
In many product categories of goods where U.S. imports from China decreased, a small number of suppliers — often just a single country — took over China’s reduced share. The interactive graphs below illustrate how U.S. import patterns for various product categories have shifted between 2017 and 2022. The height of the bars in the charts and the depth of the color on the map represents the volume of trade redirected to other countries as direct U.S. imports from China declined due to tariffs. The visualization highlights how tariffed products saw a sharp drop in imports from China, with countries like India and Vietnam stepping in to fill the gap. In contrast, for largely non-tariffed goods like pharmaceuticals, imports from China continued to rise significantly while other countries registered miniscule increase in their exports to the U.S.
Change of Export to the U.S.
U.S. Remains Dependent on Imports of “Strategically Important Goods,” Often Beholden to China Plus One
Part of the rationale for imposing high tariffs is to limit the U.S. dependence on foreign imports, especially in the strategic industries. 1 As shown in the graph below, for over 70 percent of products, at least 75 percent of China’s lost market share was made up by just one supplier. Moreover, for strategic industries, the share is slightly greater—suggesting these products are, if anything, less likely to be widely diversified across a number of suppliers, as China exits.
Proportion of products in which a single country replaced a certain portion of China’s exports to the U.S.
The suppliers that replaced China’s exports to the U.S. have expanded integration with Chinese supply chains
Finally, while imports from China decreased, tariffs have been less effective than what one might expect from a simple look at import data. In their statistical analysis, Freund and her co-authors find that countries which saw the most growth in exports to the U.S. during the period of tariffs also saw significant growth in their imports from China in those same products. This means that the countries which replaced Chinese manufacturing in U.S. supply chains are expanding integration with China. Overall, the story they tell is that rather than reducing reliance on Chinese supply chains in critical industries, tariffs have simply shifted dependency to other countries that are increasingly dependent on China.
Taken together, these four points speak of the effects of U.S. tariff policy, which may not have worked out as Washington had hoped. If the goal was merely to reduce China’s share of U.S. imports in critical sectors, the policy can claim some degree of success. However, the policies did little to diversify supply chains, as a small number of countries simply took the place of China as key suppliers. Furthermore, and perhaps even more critically, many of these countries remain deeply embedded in the very Chinese supply chains that U.S. policymakers sought to avoid. The takeaway is clear: despite efforts to decouple, the U.S. and China remain intertwined, if now at a slightly greater distance than before.
Authors
Harris Doshay, Assistant Director of Research and Writing, 21st Century China Center, UC San Diego School of Global Policy and Strategy
Young Yang, Research Data Analyst, China Data Lab at the 21st Century China Center, UC San Diego School of Global Policy and Strategy
This blog post is based on a paper by Freund, C., Mattoo, A., Mulabdic, A., & Ruta, M. (2024). Is US trade policy reshaping global supply chains?. Journal of International Economics, 152, 104011. https://www.sciencedirect.com/science/article/abs/pii/S0022199624001387