Over the previous yr, U.S. commerce coverage with China has undergone monumental adjustments, however with surprisingly little impact on general commerce balances. In truth, the U.S.’s twelve-month commerce deficit, whereas extremely unstable resulting from import front-running early within the yr, ended 2025 at $1.2 trillion, virtually unchanged from 2024. On the identical time, China’s commerce surplus with the world truly elevated from $1 trillion to $1.2 trillion. Nevertheless, when taking a look at adjustments between particular person international locations, one sees giant shifts in bilateral balances. On this submit, we’ll 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 international locations within the Affiliation of Southeast Asian Nations (ASEAN). The highest panel exhibits 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 exhibits 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 international locations inside ASEAN, Vietnam was the one largest driver of the deficit improve. Lastly, the underside panel exhibits the bilateral balances vis-à-vis China and ASEAN. These knowledge agree that there was a big improve in China’s surplus with ASEAN. Taken as an entire, these charts present proof that, final yr, China’s commerce with the U.S. more and more rerouted—a method or one other—by means of 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 few of the Modifications in U.S. Deficits Mirrored Statistical Anomalies
Digging a bit deeper into adjustments in these bilateral commerce flows, we see first that there are clear discrepancies within the knowledge that the U.S. and overseas 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 stable crimson line exhibits 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 exhibits the common of this discrepancy within the interval earlier than the first commerce battle in 2018, whereas the dotted line exhibits 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 look 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 course 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 larger than from ASEAN (34 % versus 25 %), and about half of ASEAN commerce was not even dutiable. Towards 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 submit. The charts under dig deeper by exhibiting the 5 largest adjustments within the U.S. commerce balances with China and ASEAN on the Harmonized System Code (HS code) two-digit degree. By far the most important 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 exhibits an almost $70 billion improve in its surplus in HS 85.
Modifications in Commerce Are Seen in Equipment and Electronics
Word: U.S. values present adjustments in deficit; China values present adjustments 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 units skilled very important 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 improve 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 whole drop in HS 84. These adjustments 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 example, 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 adjustments level to a redirection of ultimate meeting from China to ASEAN nations, decreasing direct U.S. publicity to Chinese language exports. Furthermore, solely about 1 % of products below HS 84 face an import tariff when coming from ASEAN, versus practically 90 % for China.
This rerouting doesn’t require a whole overhaul of provide chains, because of their inherent flexibility. Corporations can relocate last 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, recollections, shows, components of transmission units, and built-in circuits (HS 854231, 854232, 852491, 851779, 854239), make up $47 billion of the beforehand talked about practically $70 billion improve 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 in, 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 tools differ broadly, however some sources estimate that spending on computing {hardware}—together with semiconductors and networking tools— will attain roughly $550 billion in 2026 alone.
The flows into ASEAN are additionally supplying the elements wanted for digital infrastructure in the US. The information facilities powering know-how corporations’ AI wants rely closely on servers, high-speed networking, and supporting electronics. One subcategory that stands out in our analyses is networking tools, broadly outlined as switching and routing apparatuses (HS 851762). Routers direct packets of information 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 provision chain is definitely shifting. Networking tools has contributed $24 billion to the U.S.’s rising deficit with ASEAN, representing practically two-thirds of the $37 billion whole 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 tools has flipped from a surplus to a deficit, exhibiting a internet influx of slightly below half a billion {dollars} of such tools into China. Though the web ASEAN-China flows within the class are small, we consider that it’s a good instance of how ASEAN is turning into extra central within the provide chain of information heart inputs.
General, 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 by means of ASEAN provide chains. Each shopper electronics and AI infrastructure at the moment are driving U.S. imports from ASEAN, reflecting the increasing footprint of the area. Tariff tensions and the outlook on the AI trade will probably be essential drivers of provide chain reorientation on this area, and monitoring commerce flows will probably be important to understanding how the varied pressures form the long run geography of know-how 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.
cite this submit:
Hunter L. Clark and Gregory Simitian, “In What Methods Has U.S. Commerce with China Modified?,” Federal Reserve Financial institution of New York Liberty Road Economics, Could 4, 2026, https://doi.org/10.59576/lse.20260504
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Disclaimer
The views expressed on this submit 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).