Midsized Firms Monthly Tariff Payments Triple

The question of how tariffs are affecting businesses has been answered for mid-sized companies in a report released on February 19 by JPMorganChase.

The report found that monthly tariff payments by midsize firms have tripled since early 2025. The tariff rate changes in 2025, the report noted and cited two studies-- the Gopinath and Neiman (2025) estimate that the effective tariff rate increased from around 5% in January 2025 to 14.1% in September, and the Penn Wharton Budget Model, which indicated an increase from 2.2% in January to 10.9% in October.

Another key finding of the report was that outflows to China by midsize firms have dropped by around 20% since 2024.

The decrease happened as "midsize firms with previous payments to China display some potential indications of geographic reallocation to other destinations." Outflows to Canada, the EU, Japan and Southeast Asia have all grown at least as fast as domestic transfers since 2024, while outflow growth to Mexico and India has been slightly more moderate.

The research offered the following conclusions, excerpted below.

International flows by midsize firms have only moderately diverged from domestic flows. Even as tariff payments by midsize firms have surged, international outflows have seemingly held up, with international payments only slightly lagging behind domestic payment growth. Past research has shown that firms value supplier relationships highly, so switching to alternative suppliers may be a slow and complicated process. Additionally, our payments data include flows that are unrelated to trade and foreign direct investment, so if those are growing for unrelated reasons, it might offset a corresponding decline in tariff-sensitive transaction types.

Further monitoring is important as tariff effects could still take a while to set in. The unpredictable nature of tariff announcements so far and a protracted legal battle over the validity of tariffs enacted under IEEPA means that some firms may have delayed strategic decisions about imports. Hinz et al. (2026) have found that 96 percent of tariff costs have fallen on firms and consumers in the U.S., and Cavallo, Llamas and Vazquez (2026) found that by October 2025, 43% of tariff costs were passed through to consumer prices, implying that the majority of costs were borne by businesses. In the longer run, this may not be tenable, and firms that cannot raise prices profitably could be forced to find alternative suppliers abroad or domestically.

Even if tariff policy were to remain unchanged from now on, the effects of previously implemented changes could continue to unfold for years. This underscores the importance of continually monitoring international flows to gauge how midsize firms and other agents within the economy are responding.

A decline in flows to China, coupled with higher flows to other Asian countries, suggest possible substitution in input sourcing. One of the only countries for which we see a clear decline in outflows is China, where payments are 20% lower than in October 2024. Of all major U.S. trade partners, China has been hit hardest and earliest by tariffs, so it would make sense for any effects of tariffs to be seen most clearly here. The increase in flows to other parts of Asia by firms that have previously traded with China could indicate that firms are finding alternative suppliers for production inputs in countries less affected by tariffs. However, we cannot observe if transactions in our data represent payment for a specific good, so we are unable to say with certainty if these changes represent supply chain restructuring. As tariff policy continues to develop, and as importing firms obtain more clarity on the long-run policy path, clearer effects on flows may become apparent. Continued monitoring of country-level flows can help us understand the consequences of tariff policy in detail.

For policymakers, these findings suggest that evaluating trade policy requires attention to how higher tariffs are distributed across firms, particularly midsize businesses that lack the scale to absorb sustained increases in import costs. Firm-level indicators, such as tariff payments and country-level transaction patterns, can help policymakers assess whether trade policy is meeting its objectives or imposing costs that may shape business behavior, and subsequently consumer behavior, over time, especially as uncertainty around the long-run policy environment persists.