The “Liberation Day” tariffs announced on April 2, 2025, were a clear example of President Trump’s economic nationalism, a policy approach that argues countries should prioritize domestic industries and workers over global trade and use protectionist measures when necessary. Trump took a particularly hard line on China, imposing tariffs of up to 50% before they were ruled illegal by the U.S. Supreme Court. Even so, China does not appear to have been slowed.

The United States’ biggest economic rival remains the world’s leading exporter. Its exports continue to rise while its imports keep easing, and Goldman Sachs says those cheap, widely available goods are helping reduce inflation in some developed markets. That matters because trade tensions have not eliminated China’s role in global supply chains; instead, they appear to be reshaping where those goods end up and how much they cost once they get there.

Chinese government data also suggest that U.S. demand for Chinese goods has not been squeezed out by the trade war. In June, the General Administration of Customs for the People’s Republic of China said China exported goods and services worth $43 billion to the U.S. and nearly $216 billion year to date. It also reported imports of $14.6 billion in July. On that basis, the trade balance, already heavily tilted toward China, showed exports to the U.S. rising 0.2% year on year and imports falling 0.8%.

That suggests the latest levies between the two powers have altered the behavior of Chinese consumers and businesses far more than that of Americans.

U.S. government data tell a different, and possibly misleading, story. Census Bureau figures show the U.S. has imported only $104 billion from China so far this calendar year, or about $20 billion a month. UBS strategist Paul Donovan pointed out on Friday that the discrepancy is “not because ships are sinking mid-Pacific.” He said the distortion is “unique to Sino-U.S. trade” because if imports from China are not identified as coming from China, the importer may pay a lower, or no, tax. Donovan called the gap “evidence that tariffs are being avoided.”

Whatever the difference between the U.S. and Chinese numbers, Goldman Sachs wrote in a note over the weekend that Chinese exports to the rest of the world have become large enough to help keep the cost of living lower in developed markets.

“Chinese exporters to non-U.S. [developed markets (DMs)] have grown rapidly since the pandemic,” Megan Peters wrote in the note, saying some of that strength reflects trade being redirected away from the U.S. She added: “At the same time, Chinese imports from the rest of the world have pulled back amid an increased push for self-sufficiency.”

Goldman’s data show that imports of makeup and skincare products have dropped by about 55% since 2023, while automotive imports have fallen by about the same amount since mid-2023. Clothing and accessories, as well as medical and pharmaceutical products, have also fallen by more than 20% compared with the pre-pandemic trend. For companies selling into those categories, that shift can change the competitive environment even when overall trade volumes remain high.

The inflation boon

In his Liberation Day tariff speech, Trump said foreign nations had subsidized their exports to undercut U.S. pricing, and that the U.S. had been “looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike.”

But developed markets outside the U.S. have actually benefited from cheaper imported goods during a period of persistent inflation. Using a cross-country trade-inflation panel, Peters said that for every 1 percentage point increase in Chinese exports to a country since 2024, goods prices fall by 0.5%. On average, she said, the trade link has reduced goods prices by 0.6% in non-U.S. developed markets so far.

Because of Trump’s trade war, the U.S. is unlikely to share in those longer-term disinflationary effects from importing from China.

That said, any inflation benefit from imports also comes with a tradeoff: domestic producers may be undercut, which can make their businesses less profitable.

Peters wrote: “We have previously argued that increased goods supply from China should exert a meaningful disinflationary impulse across [developed markets], especially in Europe … We expect these effects to continue to build going forward, both because the impacts of realized trade shifts may not yet be fully reflected in consumer prices, and because our China economics team expects the current account surplus will continue to widen.”

“Although the main driver of our relatively benign inflation outlook is that domestic supply and demand broadly appear in balance, these Chinese trade dynamics are another reason why inflation will likely return to near-target levels [set by central banks] in major DMs in the upcoming years.”

This story was originally featured on Fortune.com