- The Trump administration flagged over 40 countries for aiding Chinese tariff evasion through transshipment
- The White House report criticizes illegal transshipment to avoid US tariffs imposed since 2018
- China uses minor processing and relabeling in third countries to mask true origin of goods
The Donald Trump administration has flagged over 40 US trading partners, including India, Canada, and the European Union, for potential risks in aiding Chinese tariff evasion by operating a "shadow trans-shipment network". The United States vowed to tap artificial intelligence to help detect and penalise such illegal practices.
The White House report, titled 'The Great Transshipment Scam', criticised the longstanding concern surrounding "illegal transshipment," where goods could be sent through a third country that faces lower US tariffs to avoid paying higher levies imposed by President Donald Trump.
Other countries named in the report include Taiwan, Mexico, Japan, South Korea, and Vietnam.
What the Report Said
The report by Peter Navarro, the top trade advisor to President Donald Trump, said the transshipments became more prevalent after 2018, when the Trump administration imposed Section 301 tariffs on China to counter "unfair trade practices."
"For years, the great transshipment scam has let Communist China launder its exports through more than 40 countries," Navarro told reporters.
The report pointed to "more than 40 countries associated with elevated illegal transshipment risk." For some economies, transshipment risk is "embedded within broad legitimate trade flows," it said.
Others were found to be more integrated with China-linked supply chains, while a third group had advantages such as preferential US access that make them "attractive opportunistic targets" for rerouting.
"China began using these third countries for minor processing, relabeling, repackaging, reinvoicing, or routing changes that created the appearance of a new national origin while leaving the underlying Chinese content largely intact," Navarro said in the report.
He said by routing around the tariffs, China and its state-supported manufacturers and trading firms could push goods into jurisdictions with cheap labour, weak customs oversight, permissive free zones, or preferential US trade access.
The report said India's Pune–Gujarat–Chennai production belt absorbs pumps and compressors, affecting industrial supply chains in Cincinnati, Dayton, and Columbus.
"A Chinese pump that leaves Pune as Indian is a pump not machined in Cincinnati, Dayton or Columbus," Navarro said.
The report pegs the annual value of illegally transshipped goods anywhere in the range from approximately USD 40 billion to USD 303 billion, depending on the methodology and definition used.
The AI Shield
According to Navarro's report, the White House is working closely with US Customs and Border Protection on an AI-enabled "detective border" to help assess whether a shipment involves transshipped goods.
This system would tap information like shipment data, routing histories, and other tools, the report said.
Experts have long noted supply chain diversions from China since Trump's first presidency, when Washington and Beijing engaged in a tariffs war around 2018.
Among those who benefited as businesses diversified their supply chains were countries like Vietnam, economists added.
Since returning to the White House last year, Trump has imposed sweeping tariffs on US trading partners, adding to existing duties that Chinese imports face.
