U.S. tariffs primarily divert Chinese exports through third countries

What's this about?

People disagree about whether U.S. taxes on Chinese goods mostly sent those goods through other countries. These taxes made many U.S. firms seek new places to buy goods.

What supporters say

• U.S. buys of taxed goods from China fell, while buys from Vietnam and Mexico rose.
• Vietnam sold more goods to the U.S. in areas hit by the China taxes.
• Some goods from other countries still used Chinese parts or Chinese-linked firms.
• A good can ship from Vietnam or Mexico after only small changes there.

What critics say

• The facts do not show that sending goods through other countries caused most of the change.
• Some firms truly moved work, orders, and factories from China to new countries.
• U.S. firms also found new sellers, changed what they bought, or paid more.
• A customs form shows where a finished good came from, not where every part came from.

The bottom line

The taxes led to more buying from third countries, and some of those goods stayed tied to China. But we cannot say that Chinese goods mostly just went through other countries.

U.S. tariffs on Chinese goods pushed American buyers to look elsewhere, but the evidence does not show that Chinese exports were primarily rerouted through third countries. Trade diversion was significant, yet it occurred alongside real shifts in production, sourcing and prices.

The case for

The clearest evidence for the claim is that tariffs changed where U.S. companies bought goods. Imports directly from China fell in tariffed products, while imports from countries such as Vietnam and Mexico rose. Vietnam, in particular, saw export gains in products exposed to U.S. tariffs on China, a pattern consistent with companies shifting orders to alternative suppliers 1 (see Figure 1).

Some of those new third-country exports appear to have remained closely tied to Chinese supply chains. Firm- and product-level research has found sharp rises in exports from intermediary countries for goods associated with Chinese production. That research concludes that both rerouting and genuine relocation took place, meaning some goods may have reached the United States after limited processing or transshipment elsewhere rather than after a full move in production 2 (see Figure 2).

This matters because customs records identify the country from which a finished product is imported, not necessarily where its components were made or where most of its value was created. A product shipped from Vietnam or Mexico may still contain Chinese parts, Chinese value added or production linked to Chinese firms. As a result, a fall in direct imports from China does not necessarily mean an equally large fall in China’s economic connection to goods sold in the United States 3.

The broader pattern therefore supports the view that tariffs did not simply sever supply links. Global supply chains can obscure the real origins of a product, and third-country sourcing may preserve some Chinese commercial access to American consumers even when official bilateral trade figures show a decline.

The case against

The strongest objection is straightforward: the tariffs did reduce direct Chinese imports. U.S. International Trade Commission findings and peer-reviewed research report lower import quantities for affected Chinese goods, as well as higher prices paid by U.S. importers 4. That is evidence that China’s pre-tariff access to the U.S. market was meaningfully curtailed, even if some trade links continued through other countries.

Higher prices are especially important. Research finds substantial tariff costs were passed through into U.S. import prices, along with efficiency and welfare losses. If Chinese goods had simply moved through third countries without major disruption, the economic effect on buyers and importers would have been less pronounced. Instead, the evidence indicates that reduced access had real costs 6.

Nor can every increase in imports from Vietnam, Mexico or other countries be treated as Chinese goods in disguise. Companies also replaced Chinese suppliers with independent foreign producers, built new capacity outside China and, in some U.S. industries, increased domestic production 5. Supply-chain responses differed widely across products and regions, making it difficult to describe rerouting as the single main explanation.

The key missing evidence is a full accounting of what happened to trade displaced from China: how much was rerouted, how much moved to new factories, how much was supplied by other countries, and how much demand disappeared. Aggregate import data cannot reliably separate Chinese inputs embodied in third-country goods from genuine foreign production or simple transshipment (see Figure 3).

The bottom line

The evidence is balanced, but the unqualified claim is not established. Tariffs clearly prompted significant trade diversion and some rerouting through third countries 12. They also plainly reduced direct Chinese imports, raised costs and encouraged genuine supplier substitution, production relocation and some domestic output 45.

There is high confidence that several adjustment channels operated at once. But there is no common measure showing that rerouting accounted for most of the overall shift across all products and periods. The evidence therefore supports third-country diversion as an important part of the response to U.S. tariffs—not as a proven primary explanation for it.