The global trade map is being redrawn—not through a sudden collapse in international commerce, but through a quieter and potentially more consequential shift in where businesses buy, manufacture and source their supplies.
As the United States continues to reshape its tariff policy, midsize American businesses are absorbing billions of dollars in additional costs. At the same time, payment flows indicate that some companies are beginning to rethink their dependence on China, with India and other Asian economies emerging as possible alternative destinations.
A July 2026 study by the JPMorganChase Institute provides a detailed look at how the tariff regime is affecting middle-market businesses. Unlike large corporations, midsize firms often have less purchasing power, thinner margins and fewer financial resources to absorb higher import costs or negotiate favourable terms with suppliers. The result is a growing squeeze that extends well beyond the initial customs bill.
Manufacturing bears the brunt
Manufacturing has emerged as one of the hardest-hit sectors. According to the JPMorganChase Institute, apparel manufacturing carries a tariff burden of about 4.9 per cent, the highest among the industries examined. Leather and allied products manufacturing follows at 4.7 per cent.
Electrical equipment, appliance and component manufacturers face a burden of around 3.8 per cent, while machinery and computer and electronic products manufacturers are also experiencing significant pressure. Retailers are being affected as increased import costs move through the supply chain and eventually reach consumers.
Interestingly, some of the sharpest increases have occurred in industries that previously faced relatively low tariff burdens. This has altered the distribution of tariff costs across the US economy, leaving businesses that had previously been less exposed facing a substantially different operating environment.
Major port regions have naturally experienced some of the highest burdens because of their concentration of import-dependent companies and trade-related activity. But the impact is also spreading into parts of the Midwest and Southeast, demonstrating that tariff exposure is not simply a coastal or port-city problem.
Tariffs are formally imposed on imported goods entering the United States, with domestic importers initially responsible for paying them. But the economic consequences rarely stop there. Higher costs can travel through suppliers, manufacturers, retailers and consumers, depending on how easily businesses can find alternatives or pass the additional expense on.
JPMorgan’s data suggests that midsize firms have already begun adapting. Since April 2025, growth in domestic payments has consistently outpaced international payment growth by 8 to 14 percentage points. This suggests that businesses may be increasingly turning towards domestic suppliers or reducing their exposure to international sourcing.
Tariff payments themselves have moderated from their peak. Monthly tariff payments by midsize firms fell by roughly one-third from the October 2025 high. Yet they remain around twice their pre-2025 levels, indicating that the cost shock has not disappeared. The more revealing development, however, is taking place across international payment flows.
Pressure on China
China appears to be emerging as the biggest casualty of the changing trade environment.
Payments from midsize US businesses to China were around 20 per cent lower than their October 2024 level. The decline is particularly significant because China has historically been one of the most important sources of manufactured goods and production inputs for American businesses.
The decline coincides with the escalation of US tariffs on Chinese goods and suggests that companies exposed to China may be reassessing their sourcing strategies.
JPMorgan’s analysis found that firms that had previously made payments to China increased payments to other destinations, particularly Southeast Asia, Japan and India. The acceleration in payments to Japan and Southeast Asia became more pronounced after April, when tariff rates on China reached their peak.
The evidence is intriguing, but the bank has sounded a note of caution. Payment data can identify where money is moving, but not necessarily what goods are being purchased. Therefore, the figures cannot conclusively establish that American companies are replacing Chinese suppliers with Indian or Southeast Asian ones. Nevertheless, the pattern points towards a possible gradual reallocation of supply chains.
Opportunity for India
For India, the shift presents a potentially important economic opportunity.
If US companies and other global businesses decide to reduce their dependence on China, India could attract new manufacturing investment and become an alternative sourcing base. Its large domestic market, expanding manufacturing capacity and growing role in global supply chains provide a foundation for such an opportunity.
But India cannot assume that geopolitical tensions alone will deliver the gains. JPMorgan’s broader assessment highlights the vulnerability of Indian exporters to US tariff pressures, particularly in labour-intensive industries such as textiles, leather, gems and jewellery, marine products and engineering goods. Higher tariffs could make Indian products more expensive in the American market, putting pressure on demand and exporters’ margins.
India’s ability to benefit from the China shift will therefore depend on its competitiveness. Better infrastructure, lower input and logistics costs, reliable supply chains, easier business processes and stronger trade agreements will be crucial.
The country’s large domestic economy could provide an additional cushion. JPMorgan expects domestic consumption, infrastructure investment, monetary easing and tax reforms to help offset some of the weakness arising from external trade pressures.
The emerging picture is more complex than a simple “China loses, India wins” narrative. For US midsize businesses, tariffs are forcing difficult choices: absorb higher costs, raise prices, buy domestically or find suppliers elsewhere. For China, the challenge is to retain its dominant position in American supply chains despite higher trade barriers. For India, the challenge is to convert a geopolitical opening into a durable manufacturing and export advantage.
The JPMorgan findings suggest that the tariff shock may be producing reallocation rather than retreat. International business has not collapsed, but its direction is beginning to change.
That distinction could prove crucial. If the movement of payments away from China and towards India and other Asian economies continues, it could mark the early stages of a much larger restructuring of global supply chains. But if tariff uncertainty eases or trade arrangements change, companies could reverse some of these decisions.
For now, the message from the data is clear: the tariff war is no longer confined to customs duties and trade negotiations. It is beginning to influence where businesses source, whom they pay and, ultimately, where the next generation of global manufacturing may take place.
