U.S. Companies Are Reshaping Their China Ties but Full Decoupling Still Isn’t Happening

In the middle of rising geopolitical tensions between the United States and China, American companies are facing a complicated challenge: how much should they reduce their reliance on China without damaging their own efficiency? A new academic study digs into this question and reveals that the answer isn’t simple. Some firms are distancing themselves from China, but the shift is far from universal — and certainly not a clean break.

The research comes from the Journal of International Business Studies and examines how U.S. companies changed their supply chains from 2009 to 2022. The study focuses especially on what happened after 2017, the year geopolitical pressure sharply intensified with the start of the Trump administration.

The authors — Jinyuan Song, Bo Yang, Yifan Wei, and Jing Li — worked with a massive dataset showing relationships between firms and suppliers worldwide. Their goal was clear: understand how companies respond to geopolitical risk, which they define as disruptions driven by countries trying to gain an advantage over rival nations.

Before 2017, the study found that both strategic industry firms (those connected to national security) and non-strategic firms relied on roughly the same number of Chinese suppliers. But after 2017, a major shift emerged. Companies in strategic industries ended up with 29% fewer Chinese suppliers, while firms outside these industries didn’t show the same level of reduction. This indicates that U.S. national-security concerns are strongly influencing corporate behavior, especially in sectors that governments monitor closely.

Another interesting detail is how politics played a role. During the 2017–2020 Trump years, the shift away from China was seen mainly in firms with Republican-leaning ties. However, by 2021 and 2022, the pattern became widespread across companies with all political leanings. This suggests that even with changes in administration, the broader U.S. policy direction — emphasizing caution toward China — has stayed largely consistent.

But the study doesn’t simply say companies are walking away from China. Far from it. It highlights the very real barrier created by economic dependence. Companies deeply tied to China — either because Chinese customers form a big share of their revenue or because China has unique suppliers that aren’t easily replaceable — face big efficiency losses if they try to fast-track an exit. That makes a sweeping separation unrealistic.

The authors say businesses are stuck balancing two major forces. On one hand, they need to maintain legitimacy in the eyes of their own government, which now scrutinizes China-linked supply chains more closely. On the other hand, they can’t ignore operational efficiency, especially when China still offers unmatched production capacity in many industries.

Instead of choosing one extreme, many firms are moving toward what is known as the China + 1 strategy. This involves keeping some operations in China while simultaneously building capabilities in other countries to reduce over-dependence. Companies aren’t abandoning China entirely — they’re diversifying to manage risk better.

This middle-path approach is becoming more common because it preserves flexibility. Firms get to keep access to China’s huge market and manufacturing network but also create backup options elsewhere in Asia or even in North America. This helps improve supply chain resilience, a priority that has become more important since recent global disruptions.

The study also makes a point that policymakers should not treat corporate behavior as black and white. The idea of “complete decoupling” doesn’t align with economic realities. Companies can’t simply snap their fingers and rebuild decades-old supply chains overnight. Governments pushing too aggressively may unintentionally harm the industries they want to protect.

The authors suggest that policymakers need to understand the nuance behind each industry’s limitations. Some companies have more room to adjust; others are bound tightly to Chinese suppliers. Overlooking this difference might lead to policies that backfire or create unnecessary instability.

Looking ahead, the researchers want to track how companies continue to adapt — especially as political and economic conditions shift rapidly. They’re interested in understanding how firms invest in domestic operations while still trying to maintain profitable ties with China. With global dynamics changing so quickly, the next decade will likely bring even more supply chain experimentation.

One thing is becoming increasingly clear, though: efficiency alone is no longer the dominant factor in supply chain design. Resilience, adaptability, and political awareness now sit alongside cost considerations when companies decide where and how to source their goods.

As geopolitical competition continues, companies will need to fine-tune their strategies to balance economic reality with national-interest pressures. And as this research shows, the most practical approach for many firms isn’t full decoupling — it’s building smarter, more flexible supply chains that reduce risk without sacrificing performance.

Extra Context: Why Supply Chains Can’t Move Overnight

Since this topic often raises big questions, here are a few key reasons why leaving China entirely is extremely difficult for many industries:

China’s unmatched manufacturing ecosystem

China isn’t just a place with factories — it’s a full ecosystem. Suppliers, logistics providers, industrial clusters, and specialized labor are concentrated in ways that are not easily replicated. Even countries like Vietnam and India, which benefit from diversification, still lack China’s massive scale.

Switching suppliers is expensive and slow

Shifting a component from one country to another requires new contracts, quality checks, audits, logistics arrangements, and often redesigning parts of a product. This process can take years and requires serious investment.

Revenue dependence

Many American companies don’t just buy from China — they sell to China. For industries like consumer electronics, luxury goods, automotive, and chemicals, losing access to Chinese customers is not an option.

Government incentives on both sides

Both the U.S. and China now offer incentives — subsidies, tax breaks, and regulatory advantages — that influence where companies operate. This creates another layer of complexity for strategic decisions.

In short, supply chain realignment is happening, but it’s gradual and careful, not sudden and absolute.