The 2025 tariff landscape delivered one of the sharpest bilateral trade contractions in recent memory, with U.S. imports from China falling 28% year-over-year and exports to China dropping 38%, according to a new report from project44 released Monday.

The dramatic decline marks a fundamental restructuring of global supply chains rather than a temporary disruption, as Southeast Asian countries captured significant market share throughout the year. Indonesia led the charge with 34% import growth to the U.S., while Thailand posted a 28% increase, project44’s report shows.

Despite the overall contraction, late-year data suggests potential stabilization in one direction of the trade relationship. U.S. exports to China, which trended 38% lower for the full year, showed surprising improvement in the fourth quarter. November’s decline narrowed to 23% year-over-year before December delivered a 13% increase—the first positive month for U.S. exports to China in 2025.

Meanwhile, U.S. imports from China remained depressed through year-end, trending 34% lower through December with no signs of recovery.

The shipping industry has adapted to the new normal. Total blank sailings fell to 62 in December from 131 in April, a 53% decrease signaling that carrier capacity has adjusted to lower trade volumes.

The data suggests global supply chains have adapted to a new tariff-driven baseline rather than operating in a temporary disruption phase, though pending legal challenges to tariff authority could reshape trade dynamics in 2026.

Adding to the uncertainty, the U.S. Supreme Court has until June to rule on the legality of IEEPA tariffs, with speculation that a decision could come as early as this week. A ruling against the administration would raise significant questions about the White House’s response and the potential for tariff refunds.

Further complicating matters, President Trump recently stated on social media that 25% tariffs are in effect for any country trading with Iran, though no executive order has been issued. If implemented, this could apply to China—Iran’s largest trading partner—and potentially disrupt the China-U.S. trade deescalation agreement reached last November.

The broader shipping outlook remains challenged. Container import volumes at major U.S. ports are expected to remain below year-ago levels through at least May, as slowing global trade growth, economic headwinds, and ongoing policy uncertainty weigh on demand.

“There should be a brief bump in imports this month ahead of Lunar New Year factory shutdowns in Asia, but we’re otherwise headed into the post-holiday shipping lull that comes each year,” said Jonathan Gold, NRF Vice President for Supply Chain and Customs Policy, adding that retailers are seeking “more stability and certainty, especially regarding tariffs and trade policy, in 2026.”

The National Retail Federation projects January volumes will rise to 2.11 million TEU, still 5.3% lower than January 2025, with the slowdown extending through spring before May finally marks the first year-over-year gain since last August.

China’s growing trade surplus indicates the country is expanding commercial relationships beyond the U.S. even as bilateral trade contracts. Among Southeast Asian countries, Indonesia’s 34% import growth positions it as a clear beneficiary of sourcing diversification.

“As 2026 begins, we see a world increasingly focused on protecting domestic industries and addressing perceived trade imbalances,” said Ben Hackett, founder of Hackett Associates. “This approach has raised questions about the future of free trade and international economic cooperation.”