US President Donald Trump pledged that his aggressive trade policies would prompt a manufacturing "exodus" from China to the United States. However, Politico reports that despite sweeping tariff increases and vocal appeals for companies to "reshore," many American firms are choosing to stay in China.

Business leaders and trade organizations argue that remaining in China continues to be the least risky path. The uncertainty surrounding Trump's tariffs, coupled with broader instability in US-China relations, has made relocating operations unattractive or financially unfeasible.

A survey released by the US-China Business Council in July found that while some companies are reassessing their investment strategies, roughly two-thirds of US firms operating in China plan to maintain or even expand their investments.

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“Simply put, we’re trapped,” Judd King, founder of Los Angeles-based Starlux Games, said to Politico. His company relies on LED components manufactured in China. “There’s no ‘wait and see’ anymore. It’s just we have to pay [the duties].”

The situation is particularly difficult for small and medium-sized businesses, which lack the leverage of large retailers to absorb the costs or negotiate better deals with suppliers.

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Tariffs and the rising cost of doing business

Trump’s broad tariff regime has included not only China but also key manufacturing countries like Vietnam, Indonesia, and India. Since April, some tariffs have surged to as high as 145 percent. Meanwhile, India now faces an additional 50 percent tariff as punishment for purchasing Russian oil.

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These Trump tariffs are hitting businesses hard. According to Politico, big-box retailers such as Walmart, Target, and Home Depot have already reported price hikes due to increased import costs. For instance, the price of a Barbie doll at Target rose by nearly 43 percent since April, according to the Telsey Advisory Group.

Even companies that attempted to diversify through the “China-plus-one” model, sourcing from neighboring countries, are facing high duties. Many of these nations are now subject to tariff rates that nearly match those imposed on China.

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Trade uncertainty paralyzes supply chains

Beyond the financial burden of tariffs, Politico states that the lack of policy clarity is proving just as damaging. Trump’s administration has increased duties not just in response to trade concerns, but also for unrelated geopolitical disputes, further destabilizing US-China relations.

A federal appeals court recently ruled that the president may lack the legal authority to impose certain tariffs, setting the stage for a Supreme Court battle and introducing further uncertainty for businesses.

“The China-plus-one has been blown up,” Cameron Johnson, senior partner at Shanghai-based Tidalwave Solutions, told the news outlet. “Medium- and lower-end US firms are either bailing from the market or going out of business.”

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Fallout for US companies and consumers

Multiple US businesses have already filed for bankruptcy, blaming tariffs for slashing their revenue. The At Home Group and IG Design Group are two such examples.

Retail analyst Joe Feldman warned Politico that the true impact of tariffs may yet be felt. “I think we’ve gotten a bit of a false read because things haven’t been so bad year-to-date… but I’m worried it’s coming.”

Meanwhile, companies are scrambling to adjust. King, of Starlux Games, noted his firm is shifting away from toy manufacturing and toward less tariff-sensitive products, such as resin dice for tabletop games.

Despite the strain, most US companies with operations in China still intend to expand, driven by competitive pressure and the sheer size of the Chinese market. As Tidalwave’s Johnson puts it:

“None of this stuff is going to be reshored. The US doesn’t have the ecosystem, the people, the tax incentives or the money.”