Charts of the Day: Trade Winds Shifting Around Tariffs

Over two months on from Liberation Day, US tariff collection continues missing worst-case-scenario forecasts by a country mile, which we think has a lot to do with US stocks’ ongoing recovery from the springtime tariff shock. Markets pre-priced those worst-case estimates quickly, then recovered as things didn’t go as bad as feared. We see a few reasons for the positive surprise, and the latest trade data from Asia hint at a big one: transshipping.

Exhibit 1 shows China’s exports to the US, Taiwan and the Southeast Asian trade bloc (ASEAN) since the start of last year. As you would expect, shipments to the US nosedived after Liberation Day. The decline deepened last month despite both sides backing down from triple-digit levies as businesses here scrambled to avoid the still-high 30% charge. Meanwhile, Chinese exports to ASEAN and Taiwan stayed strong.

Exhibit 1: Chinese Exports by Geography

Source: FactSet, as of 6/9/2025. Bilateral Chinese exports, January 2024 – May 2025.

During Trump’s first term, businesses skirted higher Chinese tariffs by transshipping products through lower-tariffed neighbors. Vietnam was a huge beneficiary. In some cases, it seems goods just took a quick pitstop for unpacking and relabeling as Vietnamese products. In others, businesses sent components from China for assembly in Vietnam, then on the journey to the US. Data now hint pretty strongly that this is happening again in Vietnam and elsewhere in Southeast Asia.

US import data for May aren’t out yet, but as Exhibit 2 shows, a lot of that April bump seems to have made its way to our shores. And Taiwanese data, out today, show its exports to the US jumping an astounding 87.4% y/y in May.^[i] Similarly, Singapore reported a 113% y/y boom in “re-exports” in April.^[ii] (Data for May aren’t out yet.) Some of this is probably frontrunning the potential return of reciprocal tariffs next month, but it wouldn’t surprise if Chinese businesses were also using their various neighbors as a conduit to the US.

Exhibit 2: US Imports by Geography

Source: FactSet, as of 6/9/2025. Bilateral US imports, January 2024 – April 2025.

While this has all helped US households and businesses in the short term, it also illustrates why ongoing tariff uncertainty is a headwind. No one knows what will happen when reciprocal tariffs’ 90-day pause expires next month. Will they take effect and disrupt transshipping patterns, forcing businesses to reroute again? Will a deal with China render it all moot? How can anyone plan?

In our view, this is why the US remains low on global stocks’ leaderboard year to date despite the recovery. Tariffs hurt and cause uncertainty for the imposer most of all, while the rest of the world can move on and focus on boosting trade with one another. US markets are showing us they can live with tariffs, but thriving, for now, seems to be another matter.