Political Alignment Is Quietly Shaping How the US Is Pulling Its Supply Chains Away From China

Efforts to reduce US dependence on Chinese manufacturing are often described as a simple search for cheaper or more diverse supply options. But new academic research suggests the reality is far more political. According to a detailed study by scholars from the University of Michigan, Princeton University, and the University at Buffalo, US–China decoupling is happening mainly where American firms can move production to countries that are not just capable, but also politically aligned with the United States.

The findings challenge the common assumption that companies will automatically shift away from China whenever alternative suppliers exist. Instead, the research shows that political alignment is the decisive factor, not merely manufacturing capacity or cost competitiveness.

How US Firms Responded After the China Tariffs

The study closely examines how US companies reacted after the Trump administration imposed tariffs ranging from 7.5% to 25% on nearly all imports from China starting in 2018. These tariffs were designed to pressure firms into diversifying their supply chains and reducing reliance on Chinese production.

Researchers analyzed import data across thousands of product categories, comparing sourcing patterns before and after the tariffs took effect. This large-scale approach allowed them to track which industries actually reduced imports from China—and which ones did not.

The results were striking. Imports from China dropped significantly only in product lines where US firms already had viable supply options in allied or geopolitically friendly countries. In contrast, when alternative suppliers were located in non-aligned or politically uncertain countries, firms largely kept their supply chains rooted in China, even when tariffs increased costs.

In other words, having an alternative supplier on paper was not enough. That alternative also had to be politically safe.

Why Political Alignment Matters More Than Cost

From a purely economic perspective, it might seem logical for companies to move production to any country that can manufacture the same goods at a similar price. But the study finds that firms view geopolitical risk as just as important as cost.

Relocating production from China to another country with unstable relations with Washington does little to reduce long-term vulnerability. Companies are wary of simply trading one geopolitical risk for another. As global political tensions increase and trade relationships become less predictable, firms prioritize stability, alliances, and political trust.

This explains why many industries continued importing from China even when capable manufacturers existed elsewhere. If those manufacturers were located in rival or non-aligned states, firms often decided that staying in China was the less risky option.

Evidence From Tariff Exemption Requests

The research goes beyond trade data and looks at firm behavior in another revealing way: tariff exemption requests. After the tariffs were introduced, US companies submitted more than 18,000 requests to the Office of the US Trade Representative asking for relief from the new import taxes.

These requests turned out to be highly informative. Companies were far more likely to seek exemptions when their industries lacked politically aligned supplier alternatives. In effect, these firms were signaling that they were stuck. They could not easily move production elsewhere without creating new risks or disruptions.

Meanwhile, firms that did have allied supplier options often avoided public fights over tariffs altogether. They quietly shifted production and adjusted their sourcing strategies without drawing attention.

This contrast highlights how political geography shapes corporate behavior, even when companies are not openly discussing geopolitics.

Decoupling Along Political Blocs, Not Markets

One of the most important conclusions of the study is that supply chain realignment is happening along political blocs rather than purely economic lines. This marks a clear break from decades of globalization, when production decisions were driven largely by labor costs, efficiency, and economies of scale.

Today, firms increasingly see supply chains as strategic assets tied to national security and foreign policy. Moving production to allied countries helps reduce exposure to sudden sanctions, export controls, or diplomatic breakdowns.

As a result, decoupling is selective rather than universal. It is strongest in industries where allied supply chains already exist and weakest where China dominates global production.

Why Full US–China Decoupling Remains Unlikely

Despite growing political tensions, the researchers argue that a complete economic separation between the US and China is unlikely in the near future. China still holds a dominant position in many industries, particularly where manufacturing ecosystems are deeply entrenched and difficult to replicate quickly.

In sectors where allied countries lack sufficient capacity, US firms remain heavily dependent on Chinese suppliers. Breaking that dependence would require sustained investment, long-term planning, and coordinated efforts among allied economies.

Without those investments, firms face a simple reality: moving production is either too costly, too risky, or both.

The Role of Alliances in Future Supply Chains

One of the study’s broader implications is that the future of US–China economic relations may depend less on individual corporate decisions and more on the strength and depth of international alliances.

If allied countries expand manufacturing capacity together, decoupling becomes easier and more sustainable. If they do not, many industries will remain tied to China by necessity rather than preference.

This suggests that government policy, industrial planning, and diplomatic cooperation will play a critical role in shaping global supply chains over the next decade.

Understanding Decoupling Beyond the Headlines

The term “decoupling” is often used loosely in political debates, but this research shows that the process is uneven, constrained, and highly strategic. It is not about abandoning China across the board. Instead, it is about carefully choosing where disengagement is feasible and where dependence must continue.

For readers trying to understand global trade shifts, this distinction matters. Decoupling is not a single switch—it is a slow, selective reorganization of economic relationships, guided as much by politics as by markets.

As geopolitical competition intensifies, supply chains are becoming less about efficiency alone and more about trust, alliances, and long-term stability. This research makes one thing clear: politics now sits at the center of global trade decisions.

Research paper: https://link.springer.com/article/10.1007/s11558-025-09596-1