US tariffs on China have changed the routes through which Chinese-made content reaches the US far more than they have reduced US dependence on China. Examining value-added trade flows through 2024 shows that US reliance on Chinese producers has fallen much less than bilateral trade data suggest. Spurred by President Donald Trump’s tariffs on China in his first term, Chinese goods and services increasingly make their way into the US embedded in US imports from third countries.
Measuring value-added trade flows identifies the ultimate source of imported content rather than the last border the goods cross before arriving in the US. For example, the US importing a $1,000 laptop from Vietnam is measured as bilateral trade between the US and Vietnam. But say 60 percent of the final value of the laptop are parts that originated in China. Trade-in-value-added methods would measure the laptop’s US value-added imports from Vietnam as $400 and US value-added imports from China as $600.
China’s share of total value added in US imports shows substantially less decoupling of the world’s two largest economies than China’s share of total US imports. In the years just before Trump’s first trade war, the two measures had nearly converged: By 2017, China accounted for about 18 percent of total US imports, while Chinese value added accounted for an estimated 17.7 percent of the total value added embodied in US imports. After 2018, however, the two measures diverged sharply. China’s share of total US imports declined steadily, to roughly 11 percent in 2024. By contrast, its value-added share rose further after 2018, peaked at just over 19 percent in 2021, and then eased back modestly to 15.4 percent in 2024. In other words, while the bilateral import measure shows a drop of roughly 7 percentage points from its pre-trade-war level, the value-added measure indicates a decline of only 2.3 percentage points. The value-added data, therefore, suggest Chinese content has found pathways around the tariffs.
This PIIE Chart is adapted from Mary E. Lovely and Christine Y. Wan’s Policy Brief, Made with China: Global Supply Chains and the Limits of US Decoupling.
