What: China's companies are fundamentally restructuring their operations in response to US trade tensions, driving a selective decoupling of the world's largest economies.

Why it is important: The strategic responses of Chinese companies are reshaping global retail supply chains and accelerating technological innovation, creating new patterns of international trade that will persist beyond current tensions.

Chinese enterprises are implementing comprehensive reforms in response to US trade pressures, marking a significant shift in global retail dynamics. The transformation encompasses strategic overseas investments, supply chain restructuring, and accelerated technological innovation. Companies are actively diversifying their export markets beyond North America, with only 30% of Chinese exports now destined for G-7 economies, down from 48% in 2000. This shift is particularly evident in labour-intensive sectors like apparel and basic electronics, while capital-intensive industries remain more anchored due to complex supply chain dependencies. The adaptation extends to technological development, with firms like Cambricon and Loongson reporting less than 1% of revenues from overseas markets, indicating successful domestic market cultivation. Chinese companies continue to promote international collaboration, particularly in emerging markets, while simultaneously developing indigenous technologies. This balanced approach of maintaining selective international engagement while reducing dependence on Western markets and technology represents a nuanced form of economic decoupling that is likely to persist beyond current trade tensions.

IADS Notes: Recent developments underscore the scale of this transformation. In March 2025, BCG projected USD 640 billion in additional US import costs, prompting major retailers like Costco and Walmart to pressure Chinese suppliers for concessions. February 2025 saw Shein offering 30% higher procurement prices to relocate manufacturing to Vietnam, while the elimination of the USD 800 de minimis rule affected 4 million daily shipments. Consumer confidence recorded its sharpest decline since August 2021, with 84% of Canadians reconsidering their purchasing strategies. The retail industry's response has been multifaceted, from accelerated AI adoption for supply chain optimisation to the implementation of "Trump Majeure" clauses, signalling a fundamental transformation in global retail operations.

How China’s companies are responding to the US trade war