Tariffs reshaped trade flows
RBC Economics finds that U.S. tariffs didn't eliminate import demand but redirected sourcing through third countries, leaving the overall goods deficit largely unchanged and complicating origin checks and landed costs. That rerouting increases supply‑chain complexity and creates more country‑of‑origin paperwork for distributors and buyers. (rbc.com)
The surprise in the new tariff data is that the United States kept buying foreign goods. It just bought fewer of them directly from China and more of them through places like Vietnam, Taiwan, Malaysia, India, Thailand, and Mexico. (rbc.com) Royal Bank of Canada says the overall United States goods and services deficit did not meaningfully narrow in 2025, and the United States still posted a record $1.23 trillion goods deficit. The bank’s point is simple: tariffs changed the map of trade faster than they changed the volume of trade. (rbc.com) China is the clearest example. Royal Bank of Canada says the United States-China goods deficit fell to about $202 billion in 2025, and the Office of the United States Trade Representative says United States goods imports from China dropped to $308.4 billion, down 29.7 percent from 2024. (rbc.com) (ustr.gov) The missing China volume showed up elsewhere. Royal Bank of Canada says the United States deficit with Vietnam widened by $54.7 billion to $178.2 billion in 2025, the deficit with Mexico rose by $25 billion to $196 billion, and the deficit with Taiwan nearly doubled to $146.8 billion. (rbc.com) Taiwan’s jump has a specific story behind it. Royal Bank of Canada ties it to Taiwan’s dominant role in advanced semiconductors, which are the chips used in servers and data centers, so a boom in artificial intelligence hardware can swell imports even while tariffs are hitting other routes. (rbc.com) (bea.gov) This is what trade rerouting looks like in practice. A product that once moved from a factory in China straight to a United States port can now pick up extra processing, paperwork, or assembly in a third country before it crosses the border. (foleyhoag.com) (trade.gov) That is where country-of-origin fights start. United States customs law does not treat the last stop on the shipping route as the product’s origin, and the legal test is whether the good was wholly made in a country or was changed enough there to count as a “substantial transformation.” (ecfr.gov) (trade.gov) For importers, that turns tariffs into an accounting problem as much as a tax problem. Every extra supplier, assembly step, and border crossing creates more certificates, bills of materials, and origin checks that buyers and distributors have to keep straight if they want the tariff rate to hold up under audit. (cbp.gov) (foleyhoag.com) The cost of that complexity does not show up neatly in one customs line. It shows up in longer supplier maps, more compliance work, and landed costs that can rise even when the factory price stays the same, because freight, brokerage, and documentation all stack on top of the tariff itself. (rbc.com) (cbp.gov) The latest federal trade release helps explain why this story is still moving. The Bureau of Economic Analysis said the United States goods and services deficit was $70.3 billion in December 2025, with imports of $357.6 billion and exports of $287.3 billion, so the country was still importing heavily at the end of the year. (bea.gov) So the tariff era did not produce a clean break between “buy from China” and “make in America.” It produced a messier system where the same demand often survives, the route changes, and the hardest job shifts to the people who have to prove where a product really came from. (rbc.com) (ecfr.gov)
