WASHINGTON — The White House released a report on Aug. 13 alleging that more than 40 countries have been used as transit points for Chinese goods to evade U.S. tariffs, a practice described as “illegal transshipment.”
The report, titled by the administration as “The Great Transshipment Scam,” claims Chinese exporters systematically reroute goods through third countries—such as Mexico, Vietnam, Singapore, and the European Union—to disguise their origin before shipping to the U.S. The White House alleges this practice has resulted in $19 billion to $26 billion in annual revenue losses for the U.S. Treasury.
Key Findings of the Report
The document, released by the Trump administration, estimates the annual value of illegally transshipped goods ranges from $40 billion to $303 billion, depending on methodology. It further asserts that this practice has displaced approximately 450,000 U.S. jobs and reduced GDP by up to $150 billion annually. The report attributes these figures to model-based illustrations rather than observed counts.
According to the White House, Chinese manufacturers use methods such as relabeling, repackaging, re-invoicing, minor processing, or false country-of-origin claims to obscure the Chinese origin of goods. For example, the report cites cases where Chinese components are shipped to Vietnam, assembled into products like recliners, and then falsely declared as Vietnamese-made upon export to the U.S.
Countries Flagged and Categorized
The report categorizes the flagged nations into three groups based on their perceived risk in facilitating transshipment:
- Embedded in Broad Trade Flows: Economies where transshipment risk is embedded within legitimate trade activities.
- Integrated with China-Linked Supply Chains: Countries more deeply connected to Chinese manufacturing networks.
- Opportunistic Targets: Nations with preferential U.S. trade access that make them attractive for rerouting goods.
Singapore, Mexico, Canada, the European Union, India, Japan, South Korea, and Vietnam are among the countries listed under these categories.
Administration’s Response and Rationale
White House trade advisor Peter Navarro described the practice as a “modern-day smuggling” scheme and stated that the administration plans to use artificial intelligence to detect illegal transshipment in the future. The report also warns that the U.S. will pursue penalties against trade partners found to facilitate such practices.
The allegations come amid ongoing trade tensions between the U.S. and China, which escalated after the U.S. imposed tariffs on hundreds of billions of dollars’ worth of Chinese goods starting in 2018. The White House argues that transshipment undermines these tariffs, allowing Chinese goods to enter the U.S. market at lower tariff rates.
China’s Stance and Broader Implications
The Chinese government has not publicly responded to the report’s specific allegations. However, Beijing has previously described its trade relationship with the U.S. as one of “strategic stability”, despite ongoing disputes over tariffs and market access.
Economists and trade analysts note that transshipment is not a new phenomenon but has been exacerbated by high tariff regimes. Some argue that the U.S. tariffs themselves may be incentivizing circumvention, while others caution that the report’s estimates of economic impact are model-dependent and may not reflect real-world outcomes.
The report’s release precedes a planned September visit by Chinese leader Xi Jinping, though no direct link between the two events has been confirmed.