A new analysis found that payments made by U.S.-based mid-sized companies to Chinese companies declined significantly last year as customs duties on Chinese imports increased under the Trump administration.
The JPMorgan Chase Institute released a report Thursday revealing that payments made by mid-sized companies to China have declined significantly, falling by about 20% between 2024 and 2025, even as overall international payments have remained stable.
“This is perhaps not surprising, as China has been hardest hit by tariffs among the United States’ major trading partners, both in terms of the overall effective rate, which stood at 37.4% in October 2025, according to the Penn Wharton budget model, and in terms of policy uncertainty, with tariff announcements changing frequently over the course of the year, briefly reaching rates as high as 125% before subsequent reductions,” the Institute wrote.
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The report reveals that among mid-sized companies that had already exits to Chinatheir outflows to other parts of Asia have increased, notably to Southeast Asia, Japan and India, when looking at a sample of mid-sized companies with at least $5,000 in outflows to China in 2023 and 2024.
“One potential reason for increased flows to these countries could be import substitution, but many other explanations are possible,” the authors note.
Payments by mid-sized U.S. companies to their trading partners in China declined in 2025 due to rising tariffs, the JPMorganChase Institute found. (STR/AFP/Getty Images)
Clark Packard, a research fellow at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, told FOX Business: “At this point, it is somewhat uncertain whether Chinese products are being shipped to countries in the region, modified or processed (that’s key) and then sent to the United States on a large scale.” That said, there are indications that this is likely.
Packard said that as long as the products are modified in the second country, it does not represent transshipment, a term used to refer to business practices aimed at bypass tariffs and other business rules.
“Transshipment is the sending a product to a country, affixing the original label of that country and sending it to a third country without serious modifications to the product. As long as the products undergo substantial processing or modification in a country, they are truly originating products of that country,” Packard said.
“It would not surprise me if Chinese companies opened processing centers in Vietnam and other Asian countries to finish products ultimately destined for the United States and this was the result of lower tariffs than those applied to this country compared to China.”
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President Donald Trump increased tariffs on China last year. (Lintao Zhang/Getty Images; Rebecca Noble/Getty Images)
Derek Scissors, a senior fellow who studies the Chinese economy at the American Enterprise Institute, pointed to import flows from Vietnam and Taiwan as possible sources of transhipped goods.
“What reflects the transshipment of Chinese products is the increase in imports from Vietnam and particularly Taiwan. You can make the argument that Vietnamese products are competitors to Chinese products, and they have won because of the tariffs on China,” Scissors told FOX Business. “But there is considerable Chinese investment in Vietnam in the area of consumer goods that we buy from Vietnam.
“If you are a Taiwanese producer in China and you face high barriers regarding goods produced in China, it is very simple to reroute them to Taiwanese products. It may simply require a label. At most, you change your production process so that there is a last stop in Taiwan rather than a last stop in China. Then what you are shipping is considered Taiwanese.”
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Tariffs are taxes on imported goods that are paid by the importer. (Brandon Bell/Getty Images)
The JPMorgan Chase Institute report also found that monthly rate payments made by mid-sized American companies have tripled since the start of 2025.
Tariff outflows from mid-sized companies increased from nearly $100 billion per month at the start of 2025 and the previous two years to around $300 billion per month at the end of 2025.
“A stable trend was interrupted by a sharp increase starting in April 2025, coinciding with the implementation of the first tariff rate increases during that year. Total payments continued to increase throughout 2025 and ultimately reached a level approximately three times what it was through early 2025,” the JPMorgan Chase Institute wrote.
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