A new report reveals that although the aggressive trade policies implemented in 2025 have effectively created a substantial rift between midsize American businesses and Chinese suppliers, the decoupling has come at a staggering cost for U.S. companies.
The report, titled “Tracking international payments: How are midsize firms reacting to tariffs?”, depicts a business sector that is under historic pressure but still holding on. Based on JPMorgan banking data regarding the financial outflows of firms with revenues ranging from $10 million to $1 billion, the cost of importing goods has soared, and American companies are bearing the brunt.
While these companies are scrambling to find alternative sources to Chinese manufacturing, they are paying a high price for imports. After the implementation of tariff rate increases and new universal tariffs in April 2025, the monthly tariff payments of these midsize firms have tripled compared to the levels in early 2025.
Decoupling is Occurring
If the main aim of the trade policy was to reduce American dependence on Chinese manufacturing, the banking giant’s data indicates that the strategy is working. Outflows from midsize U.S. firms to China have decreased by around 20% since 2024.
However, this withdrawal from China has not meant a withdrawal from the global economy. Instead of bringing operations back to the U.S. entirely, American businesses seem to be engaged in a costly game of shifting suppliers.
The report finds that while payments to China dropped, outflows to other regions, specifically Southeast Asia, Japan, and India, have increased. This evidence points to “import substitution,” where U.S. firms are quickly looking for alternative suppliers in friendly countries to avoid the highest taxes imposed on Beijing.
The “Squeeze” on the Middle Market
The JPMorgan researchers warn that although trade volumes have stayed stable, the financial health of these companies might be at risk. Midsize firms are particularly vulnerable; they are often too big to avoid regulatory scrutiny but “lack the scale to handle sustained cost increases” compared to large multinational corporations.
The burden of these new taxes has been especially uneven. While the “universal tariffs” announced in April 2025 did include new firms that previously paid no duties, the JPMorgan analysis found that the majority of the increase in government revenue came from firms that were already paying tariffs. Essentially, the policy has increased the financial pressure on existing importers rather than spreading the cost across new players.
Moreover, the removal of the de minimis exemption in 2025, which previously allowed shipments under $800 to enter duty-free, likely contributed to the rising costs, closing a loophole that many smaller importers relied on.
Resilience or Delayed Consequences?
Despite the tripled tax bills, the international activity of these firms did not collapse. International payments remained stable throughout 2025, only slightly behind the growth of domestic payments.
The report concludes that midsize firms are adapting through “gradual reallocation” rather than immediately pulling out of global markets. However, the researchers caution that payment stability might hide the real damage. Since supply relationships take years to build, many firms may be absorbing the higher costs in the short term while desperately searching for cheaper alternatives. As the report states, the full “broader effects of trade policy changes may only become obvious with a significant delay”.
For now, the data is clear: midsize American business is successfully moving away from China, but it is paying a historic premium to do so.
For this story, journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.