Efforts by the United States to reduce reliance on Chinese supply chains are primarily succeeding in sectors where American companies can shift production to countries that are both economically viable and politically aligned with the U.S., according to a new study from researchers at the University of Michigan, Princeton University, and the University at Buffalo.
The research, published in The Review of International Organizations, analyzed how U.S. firms responded after tariffs of 7.5% to 25% were imposed on nearly all imports from China beginning in 2018. By tracking import data across thousands of product categories before and after these tariffs, the study found that imports from China declined most sharply in areas where allied supplier options existed. In contrast, when potential alternative suppliers were based in countries not aligned with U.S. interests, companies largely continued sourcing from China despite increased costs and 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 study highlights that simply having alternative suppliers is not enough for companies to move away from Chinese production; those alternatives must be located in geopolitically friendly nations. When replacement suppliers are available only in countries with adversarial or uncertain relations with Washington, firms tend to maintain their supply chains in China.
Further analysis included more than 18,000 requests submitted by U.S. firms to the Office of the U.S. Trade Representative for exemptions from tariffs. The data showed that companies lacking access to politically aligned supplier alternatives were much more likely to seek tariff exclusions—an indication they could not easily switch away from Chinese sources without harming operations.
“Firms that had allied supplier options simply exited quietly,” Osgood said. “Firms without them stayed and fought the tariffs.”
The findings suggest that current supply chain realignment is driven by political considerations rather than just cost or logistical factors—a shift from previous decades when globalization prioritized efficiency and price advantages.
Researchers argue that while some decoupling has occurred where robust allied supplier networks exist, significant dependence on China remains in industries where it holds dominant market share. They conclude full economic separation between the two countries is unlikely unless there is substantial investment in expanding manufacturing capacity among allied economies.
“Decoupling is easiest in sectors where allied supply chains already exist,” Osgood said. “Elsewhere, dependence will persist.”
Osgood’s co-authors on this research include Ayse Eldes of Princeton University and Jieun Lee of the University at Buffalo.
