JPMorgan analysis finds Trump’s tariffs are working on China — at huge cost to US small businesses

A new analysis by the JPMorgan Chase Institute shows that aggressive trade policies implemented by 2025 have successfully bridged a significant gap between mid-sized US businesses and Chinese suppliers, but the decoupling has come with a surprising price tag for US companies.

The report, “Tracking International Payments: How Do Medium-Sized Firms Respond to Tariffs?” Paints a picture of a business sector bent but broken by historical pressures. According to JPMorgan Banking data on the financial outflows of firms with revenues between $10 million and $1 billion, the cost of importing goods has skyrocketed — and American companies are suffering.

As these companies seek alternative sources for Chinese products, they are paying a higher price on imports. Following the April 2025 tariff hike and the implementation of the new universal tariffs, monthly fee payments by these midsize firms have tripled compared to the initial 2025 levels.

If the primary objective of the trade policy was to reduce US dependence on Chinese manufacturing, the banking giant’s figures suggest the strategy is working. From 2024, exports from mid-sized U.S. firms to China will decline by nearly 20%.

However, China’s backwardness does not indicate that it will withdraw from the world economy. Instead of completely reshoring operations, American businesses appear to be engaging in an expensive game of musical chairs.

The report found that while payments to China have fallen, outflows to other regions – notably Southeast Asia, Japan and India – have accelerated. This evidence points to “import substitution,” where U.S. firms rush to find alternative suppliers in friendly countries to bypass tough tariffs imposed in Beijing.

JPMorgan researchers have warned that the financial health of these companies could be at risk if trading volumes remain stagnant. Midsize firms are uniquely vulnerable; They are often too big to fly under the regulatory radar but “lack the scale to absorb sustained cost increases” compared to large multinational corporations.

The burden of these new taxes has been particularly disproportionate. A “universal tariff” announced in April 2025 captured new firms that had previously paid no tariffs, with a JP Morgan analysis finding that the bulk of the increase in government revenue came from firms. already Paying fees. Basically, the policy has increased the financial pressure on existing importers instead of spreading costs widely across new players.