How Trump's next tariffs could drive companies back to China

President Donald J. Trump's unpredictable approach to trade policy makes it difficult for businesses and consumers to know what happens next. But his upcoming round of tariffs on 16 trading partners, as well as the agreement with China to lower tariffs on some "nonsensitive" products, could lead to an ironic result. If Trump's tariffs on other countries end up too high compared with those on China, some supply chains that moved out of China in the past year might find it advantageous to move back.

Convincing companies to source from outside of China has seemed to be a Trump administration objective. In a July interview in the New York Times, US Trade Representative Jamieson Greer indicated that it would be a mistake for companies that had already moved their sourcing out of China to move it back. "I think overall people understand the direction of travel," he said. "They understand the high-risk nature of being super-reliant on China."

Competing factors exist, however. They include Trump's next round of tariffs as well as the US-China Board of Trade, which he agreed to set up with President Xi Jinping at their May summit in Beijing. As part of that deal, which contemplates US imports of $30 billion of "nonsensitive" products, Greer has suggested that the administration might reduce tariffs on China, even though leaving a tariff on nonsensitive products from another country while cutting it for China would incentivize companies to switch back and to source from China again.

Trump has used a range of legal authorities to impose various kinds of tariffs. Since the Supreme Court struck down some of them in February 2026, he has tried to resurrect a tariff wall. To understand the potential impact of his upcoming policies, it is useful to look at the way he taxed imports of smartphones versus clothing from China and India with his 2025 tariffs.

Trump imposed tariffs on smartphones from China but not India in 2025

Less than seven weeks after retaking office, Trump imposed 20 percent tariffs on all products from China, under the International Emergency Economic Powers Act (IEEPA). They were the first US tariffs to hit smartphones, which Trump had exempted from his 2018–19 trade war (figure 1).

Smartphones were economically important, making up nearly 10 percent of total US imports from China in 2024. Americans bought more than half of their smartphones from Apple, peaking at nearly two-thirds of consumer smartphone purchases in the fourth quarter of both 2024 and 2025, according to Counterpoint Research.

Apple responded to Trump's early 2025 tariffs on China by quickly sourcing iPhones from India. The company's contract assemblers, such as Foxconn and Wistron, had created an alternative supply chain for iPhone assembly in India, as Patrick McGee describes in his book Apple in China. The Shanghai lockdown of 2022 in particular pushed Apple to accelerate its efforts outside of China (McGee 2026, 364-65).

The 2025 smartphone tariffs were not global. When Trump imposed new tariffs on India and the rest of the world on "Liberation Day" (April 2, 2025) under a separate IEEPA action, he exempted smartphones. This exemption incentivized Apple to maintain its sourcing switch away from China. Even when Trump increased overall tariffs on India to 50 percent in a third IEEPA action in August 2025—as a result of his frustration over its continued purchases of Russian oil—he continued to exempt smartphones assembled in India.

Starting on March 4 and continuing through most of 2025, iPhones assembled in China thus faced a new 20 percent US tariff that iPhones assembled in India did not. Despite the tariff, total US imports of smartphones in 2025 did not fall dramatically (figure 2).

The size and the speed of the economic adjustment were stunning. By May 2025, nearly two-thirds of US smartphone imports were arriving from India, up from only 6 percent as late as October of 2024. (As of that October, China had been the source of over 90 percent of smartphone imports in the US.) Such a quick shift required more than the capacity to ramp up smartphone assembly: Reuters reported that Apple also chartered six cargo planes in March 2025 to ship roughly 1.5 million ($2 billion) iPhones from India to the US  and convinced Indian authorities to reduce the time to clear customs at Chennai airport "to six hours down from 30 hours."

US smartphone imports from China did suddenly (and temporarily) increase beginning in September 2025, despite the US tariffs of 20 percent. "In the run-up to the iPhone 17 launch in September 2025, product quality and delivery schedules were disappointing, forcing Apple to shift some orders bound for India back to Foxconn in China" (McGee 2026, 391). Nevertheless, between April 2025 and February 2026, nearly half of US smartphone imports were from India.

Trump imposed high tariffs on clothing from both China and India in 2025

Trump's 2025 tariff actions on clothing resulted in a different outcome. Even though the US tariff on clothing imports from China increased by more than the tariff on smartphones, US imports of clothing did not suddenly switch to India (figure 3), partly because Trump's tariffs on India—imposed both on Liberation Day and in August—did not exempt clothing.

By October 2025, US tariffs on clothing from India were higher than on clothing from China (figure 4). By the end of 2025, the US tariff differential between China and countries like Vietnam and Bangladesh was basically unchanged from pre-Trump 2.0 levels. For clothing, there was little new tariff incentive in 2025 to move a supply chain out of China to these alternative destinations.

US imports of smartphones and clothing have not shifted dramatically since February 2026

In February 2026, the Supreme Court struck down the country-specific tariffs imposed under IEEPA. Gone were the much higher US tariffs on smartphones from China than India, as well as the higher US tariffs on clothing from India than from China.

Since then, the US has applied a relatively flat tariff structure across countries. After the Supreme Court decision, it imposed temporary duties of 10 percent under Section 122 of the Trade Act of 1974. In July, after investigations under Section 301 of the Trade Act of 1974 into allegations that countries were importing goods produced using forced labor, Trump replaced those tariffs with 10.0–12.5 percent tariffs on imports from America's top 60 trading partners. (These tariffs again exempted products like smartphones, including from China this time.)

US import sourcing for smartphones and clothing has stabilized, but not yet changed dramatically, in response to the major US tariff adjustments beginning in February 2026, as figures 2 and 3 illustrate. (Just before the Supreme Court decision in February, Trump also ended the extra IEEPA tariff on India.) Between March and June 2026 (the most recently available data), nearly 60 percent of US smartphone imports continued to arrive from India, an even larger share than in the four months before the Court's decision. US import sourcing for clothing has also shown little change.

Why Trump's next tariff moves could change the dynamics

Trump's next policy decisions could change US import sourcing again. A new set of tariffs is expected after completion of ongoing Section 301 investigations into allegations of excess capacity in 16 economies, including China and India. Trump may increase the tariff differential on imports from China relative to other key foreign suppliers, potentially incentivizing companies to find sources outside of China, like the China versus India tariff differential did for iPhones in 2025.

Alternatively, Trump's new tariffs could incentivize US imports of certain products to move back to China. To see why, suppose the upcoming Section 301 tariffs related to excess capacity do not result in a significantly wide tariff differential favoring alternative sources, such as India. (In July 2026, the Chinese government stated that the Trump administration had committed to keep any new US tariffs on China—inclusive of the 12.5 percent tariff of the forced labor Section 301 action of July—at or below 20 percent.) If the new tariffs prove more legally durable than those struck down by the Supreme Court, the resulting reduction in uncertainty could convince companies to increase their import sourcing from China.

Even though a company may understand Greer's warning not to be dependent on China, the administration's policy may leave it no choice. If its competitors all source from China and the US tariff on alternative source countries remains too high, the desire to stay in business may force a company to buy from China too.

For certain nonsensitive products, increasing US imports from China may be what Trump wants. The US Trade Representative established a process for public comment to identify a $30 billion list of goods as part of the Board of Trade agreement and has stated that it would be willing to lower tariffs on imports from China for these goods. (While details are not yet clear, this may be in exchange for China agreeing to reduce its tariffs and import a similar amount of nonsensitive US exports.) When pressed, Greer also remained noncommittal about whether such a move could result in certain goods coming in from China at a lower tariff rate than "the same goods coming in from other countries."

It is not unprecedented that US imports for a product from a country like China might increase even though US tariffs have gone up for that product overall. My new book How to Win a Trade War (Keynes and Bown 2026, 180-87) describes historical episodes in which exactly that occurred. What mattered was that other countries all got hit with something worse.

For the supply chain implications resulting from Trump's next tariffs and his Board of Trade, look for the size of product-level US tariff differentials between China and other major potential source countries. In the absence of a substantial tariff gap, China is often too competitive on cost for sourcing companies in America to ignore.