Study: Allied import options available? Finding friendly trade partners amidst decoupling from China
Efforts to "decouple" U.S. supply chains from China are only taking hold in industries where American firms can shift production to allied or politically aligned countries, according to new research by scholars at the University of Michigan, Princeton University and the University at Buffalo.
The study finds that having alternative suppliers is not, by itself, enough to prompt companies to reduce reliance on Chinese production. Decoupling occurs only when those alternatives are located in countries that are both economically viable and geopolitically aligned with the United States. When potential suppliers are based in nations with adversarial or uncertain relations with Washington, firms largely maintain their supply chains in China despite rising costs and political risks.
"Global order is weakening. Decoupling makes the most sense where companies can move production to places that are not just capable of manufacturing the goods, but also politically stable and friendly," said Iain Osgood, associate professor of political science at the University of Michigan.
The research, published in The Review of International Organizations, examines how U.S. firms responded after the Trump administration imposed tariffs of 7.5% to 25% on nearly all imports from China beginning in 2018. The study tracks imports across thousands of product categories and compares shifts in sourcing patterns before and after the tariffs.
It found that imports from China declined most sharply in product lines where U.S. companies had existing supply options in allied markets. But when the potential replacement suppliers were located in non-aligned or rival states, imports from China remained largely unchanged. Even when those non-aligned suppliers had the manufacturing capacity to produce the same goods, firms did not shift.
This pattern shows that decoupling is being shaped not just by cost calculations but also by geopolitical considerations, the authors conclude. Relocating production to another strategically uncertain or adversarial state does little to reduce supply chain vulnerability.
The study also analyzed more than 18,000 requests that U.S. firms submitted to the Office of the U.S. Trade Representative seeking exemptions from the tariffs. Companies were far more likely to request tariff exclusions when their industries lacked politically aligned supplier alternatives. In those cases, firms effectively signaled they were "stuck" with Chinese sourcing and needed relief to continue operations.
"Firms that had allied supplier options simply exited quietly," Osgood said. "Firms without them stayed and fought the tariffs."
The findings suggest that supply chain realignment is occurring along political blocs, not simply according to price, labor costs or logistical efficiency. That marks a departure from decades of globalization in which the location of production was determined largely by cost and scale advantages.
The authors argue that while targeted decoupling is well underway in sectors with robust allied supplier networks, the United States remains deeply dependent on China in industries where China retains dominant market share.
Because of that uneven dependency, they conclude that full economic separation between the U.S. and China remains unlikely without sustained investment in rebuilding or expanding manufacturing capacity among allied economies.
"Decoupling is easiest in sectors where allied supply chains already exist," Osgood said. "Elsewhere, dependence will persist."
In effect, the future of U.S.-China economic ties may hinge less on firms' decisions or tariff policies than on the strength and depth of alliances. Without coordinated international efforts to develop alternative production networks, many industries will remain bound to China by necessity rather than choice.
Osgood's co-authors include Ayse Eldes of Princeton University and Jieun Lee of the University of Buffalo.
