Over the previous yr, U.S. commerce coverage with China has undergone monumental modifications, however with surprisingly little impact on total commerce balances. In truth, the U.S.’s twelve-month commerce deficit, whereas extremely unstable as a result of import front-running early within the yr, ended 2025 at $1.2 trillion, nearly unchanged from 2024. On the identical time, China’s commerce surplus with the world really elevated from $1 trillion to $1.2 trillion. Nevertheless, when taking a look at modifications between particular person nations, one sees massive shifts in bilateral balances. On this publish, we are going to concentrate on altering commerce flows between the U.S., China, and southeast Asia.
What Has Occurred with U.S.–China Commerce?
The charts under plot a number of views of the commerce balances between the U.S., China, and nations within the Affiliation of Southeast Asian Nations (ASEAN). The highest panel reveals the U.S.’s reported commerce deficit with China and China’s reported commerce surplus with the U.S. Each measures broadly agree that the bilateral commerce imbalance decreased. The center panel reveals an analogous set of plots for the commerce imbalances between the U.S. and ASEAN. Each agree that the U.S.’s commerce deficit with ASEAN elevated considerably. Among the many nations inside ASEAN, Vietnam was the one largest driver of the deficit enhance. Lastly, the underside panel reveals the bilateral balances vis-à-vis China and ASEAN. These knowledge agree that there was a big enhance in China’s surplus with ASEAN. Taken as a complete, these charts present proof that, final yr, China’s commerce with the U.S. more and more rerouted—a method or one other—via ASEAN.
Commerce Patterns Between U.S., China, and ASEAN
U.S. Commerce Deficit with China Shrinks
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U.S. Commerce Deficit with ASEAN Will increase
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China’s Commerce Surplus with ASEAN Will increase
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A number of the Adjustments in U.S. Deficits Mirrored Statistical Anomalies
Digging a bit deeper into modifications in these bilateral commerce flows, we see first that there are clear discrepancies within the knowledge that the U.S. and international statistical businesses report about commerce with one another. As mentioned in 2021 and 2025, these discrepancies partly replicate underreporting of U.S. imports from China. The chart under illustrates this phenomenon. The strong crimson line reveals the discrepancy between what the U.S. says it imports from China and what China says it exports to the U.S. The dashed crimson line reveals the common of this discrepancy within the interval earlier than the first commerce battle in 2018, whereas the dotted line reveals the common throughout 2021 to 2024. The “lacking import” hole with China has ballooned for the reason that first commerce battle, together with a further $25 billion final yr alone. Notably, an analogous, however smaller, discrepancy has emerged in U.S. commerce with Vietnam (and ASEAN extra broadly), however in the other way, in order that U.S. imports seem like overstated.
The U.S.’s “Lacking” Imports with China Have Elevated
Word: The discrepancy is outlined because the U.S.’s reported imports from the companion nation minus the companion nation’s reported exports to the U.S.
The route of those discrepancies is smart, because the realized efficient tariff price final yr—calculated tariff duties divided by imports topic to duties—on U.S. imports from China is far greater than from ASEAN (34 % versus 25 %), and about half of ASEAN commerce was not even dutiable. In opposition to this backdrop, a part of the change final yr within the U.S.’s commerce balances with China and ASEAN seems to have been “synthetic” within the sense that U.S. import flows seem to have been distorted by tariff minimization methods.
A Look into the Tech Sector…
Nevertheless, there have clearly been main shifts in true commerce flows, and people would be the focus of the remainder of this publish. The charts under dig deeper by exhibiting the 5 largest modifications within the U.S. commerce balances with China and ASEAN on the Harmonized System Code (HS code) two-digit stage. By far the biggest are in HS codes 84 and 85, that are the classes for high-tech computer- and networking-related items. For instance, the U.S.’s deficit with China in HS 84 and 85 declined by about $70 billion, and elevated by a reasonably related quantity, $80 billion, for ASEAN. China’s personal steadiness with ASEAN reveals a virtually $70 billion enhance in its surplus in HS 85.
Adjustments in Commerce Are Seen in Equipment and Electronics
Word: U.S. values present modifications in deficit; China values present modifications in surplus.
What are some examples of products in these classes? We’ll begin with consumer-facing merchandise in HS 84, the place laptops and tablets (HS 847130) illustrate the rerouting most vividly. These gadgets skilled very vital shifts in commerce flows final yr. Particularly, the U.S. commerce deficit with ASEAN in laptops and tablets surged by $21 billion, accounting for half of the general $43 billion enhance within the deficit inside HS 84. Conversely, the U.S. deficit with China on this subcategory has decreased by $24 billion out of a $29 billion complete drop in HS 84. These modifications are proven within the chart under.
The U.S. Deficit in Laptops Has Risen from ASEAN and Has Fallen from China
Word: The chart plots the U.S. deficit in Laptops and Tablets (HS 847130).
This sample aligns with company methods to diversify manufacturing amid U.S.-China commerce tensions. As an illustration, Lenovo has shifted manufacturing exterior of China, together with to India and ASEAN. Equally, Apple has expanded operations in Vietnam for iPad manufacturing, whereas Dell and HP started relocating parts of their pocket book manufacturing to Southeast Asia as early as 2023. These modifications level to a redirection of ultimate meeting from China to ASEAN nations, lowering direct U.S. publicity to Chinese language exports. Furthermore, solely about 1 % of products underneath HS 84 face an import tariff when coming from ASEAN, versus almost 90 % for China.
This rerouting doesn’t require a whole overhaul of provide chains, because of their inherent flexibility. Corporations can relocate ultimate meeting levels (like placing collectively laptops in Vietnam or Thailand) whereas persevering with to supply upstream elements from established Chinese language suppliers, preserving effectivity whilst commerce patterns shift to keep away from direct U.S.-China publicity. Trying extra intently at a few of these upstream elements, it turns into clear that Chinese language inputs have discovered new inroads into ASEAN. These inputs, like processors, reminiscences, shows, components of transmission gadgets, and built-in circuits (HS 854231, 854232, 852491, 851779, 854239), make up $47 billion of the beforehand talked about almost $70 billion enhance in China’s commerce surplus with ASEAN in HS 85.
From Small Units to Surging Knowledge Facilities
The sheer scale of those shifts, far exceeding what shopper merchandise alone may take up, factors to bigger structural forces. Particularly, the explosive buildout of digital infrastructure to assist AI coaching, inference, cloud providers, and knowledge storage is driving large demand for a few of these elements. Certainly, forecasts for funding in AI infrastructure and gear differ extensively, however some sources estimate that spending on computing {hardware}—together with semiconductors and networking gear— will attain roughly $550 billion in 2026 alone.
The flows into ASEAN are additionally supplying the elements wanted for digital infrastructure in the USA. The information facilities powering expertise corporations’ AI wants rely closely on servers, high-speed networking, and supporting electronics. One subcategory that stands out in our analyses is networking gear, broadly outlined as switching and routing apparatuses (HS 851762). Routers direct packets of knowledge between completely different networks whereas switches deal with the large circulation of data between servers throughout the identical community. The U.S. import surge on this class reveals the place the availability chain is definitely shifting. Networking gear has contributed $24 billion to the U.S.’s rising deficit with ASEAN, representing almost two-thirds of the $37 billion complete rise in HS 85 deficits from the area. In the meantime, the U.S.-China deficit on this class has continued to fall steadily, down by $2.2 billion this yr. On the identical time, China’s commerce steadiness with ASEAN in networking gear has flipped from a surplus to a deficit, exhibiting a internet influx of just below half a billion {dollars} of such gear into China. Though the web ASEAN-China flows within the class are small, we imagine that it’s a good instance of how ASEAN is turning into extra central within the provide chain of knowledge middle inputs.
Total, the image factors to at least one through which commerce coverage uncertainty and geopolitical tensions are driving geographical diversification, with ASEAN each absorbing and rerouting flows that beforehand moved straight from China to the U.S.
Closing Ideas
The shift in U.S. commerce away from China is actual, however the full image is extra sophisticated. Tariff-driven distortions obscure the headline numbers, and Chinese language inputs proceed to circulation via ASEAN provide chains. Each shopper electronics and AI infrastructure are actually driving U.S. imports from ASEAN, reflecting the increasing footprint of the area. Tariff tensions and the outlook on the AI trade can be essential drivers of provide chain reorientation on this area, and monitoring commerce flows can be important to understanding how the varied pressures form the long run geography of expertise manufacturing.
Hunter L. Clark is an financial coverage advisor within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.
Gregory Simitian is a analysis analyst within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.
The best way to cite this publish:
Hunter L. Clark and Gregory Simitian, “In What Methods Has U.S. Commerce with China Modified?,” Federal Reserve Financial institution of New York Liberty Avenue Economics, Could 4, 2026, https://doi.org/10.59576/lse.20260504
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Disclaimer
The views expressed on this publish are these of the writer(s) and don’t essentially replicate the place of the Federal Reserve Financial institution of New York or the Federal Reserve System. Any errors or omissions are the accountability of the writer(s).
