Tariffs reshaped sourcing, not demand
RBC finds that a year of U.S. tariff policy redirected sourcing rather than cutting overall import demand, contributing to a record $1.23 trillion goods trade deficit in 2025 as companies shifted suppliers to countries like Vietnam. The report underscores that tariff exposure is now a geography-and-SKU problem, not a single-country fix. (rbc.com)
A year of tariffs cut U.S. buying from China, but the total bill for imported goods still hit a record. Royal Bank of Canada says the United States ran a $1.23 trillion goods trade deficit in 2025, even after the tariff push that began on April 2, 2025. (rbc.com) The basic pattern was simple: companies did not stop needing shoes, chips, furniture, and machine parts. They changed the shipping label and bought more of the same categories from countries outside China. (rbc.com) China was the clearest loser on paper. U.S. goods imports from China fell to $308.4 billion in 2025 from $438.7 billion in 2024, and the U.S. goods deficit with China narrowed to $202.1 billion from $295.5 billion. (census.gov) But the missing imports did not vanish. Royal Bank of Canada says Vietnam’s bilateral goods deficit with the United States widened by $54.7 billion to $178.2 billion in 2025, while India, Malaysia, Thailand, Mexico, and Taiwan also picked up a bigger share. (rbc.com) Taiwan stood out for one very specific reason: advanced semiconductors. Royal Bank of Canada says the U.S. goods deficit with Taiwan nearly doubled to $146.8 billion as data center construction kept pulling in high-end chips that few places can make at scale. (rbc.com) Mexico showed the same limit from another angle. Royal Bank of Canada says the U.S. goods deficit with Mexico grew by $25 billion to $196 billion in 2025 even though Mexico faced tariffs of 25 percent to 35 percent at various points, because North American factories share parts across borders under the United States-Mexico-Canada Agreement. (rbc.com) That is why tariffs turned into a map problem instead of a volume problem. A tariff aimed at one country can be dodged by moving final assembly, switching component suppliers, or routing production through a country with a different tariff deal. (rbc.com) (congress.gov) The policy itself kept changing as companies were redrawing those maps. The Congressional Research Service says President Donald Trump’s administration raised tariffs on imports from all global partners after January 20, 2025, then spent April through August 2025 negotiating preliminary agreements with seven partners and a temporary truce with China. (congress.gov) The monthly numbers still show the deficit hanging around in 2026. The Bureau of Economic Analysis reported a U.S. goods deficit of $84.6 billion in February 2026, up from January, which means the country is still importing far more goods than it exports even after a year of tariff changes. (bea.gov) So the lesson from the first year was not that tariffs failed to hit China. The lesson was that modern supply chains are built like plumbing: squeeze one pipe, and the flow turns through Vietnam, Taiwan, Mexico, or Malaysia instead of stopping. (rbc.com)
