The Trump White House said in a new report on Thursday that the US is losing $19 billion to $26 billion in tax revenue annually as countries route their exports through third countries to avoid US tariffs.
According to the Associated Press, the report specifically highlights that China responded to new tariffs in 2018 by sending their goods to other nations, ranging from Mexico to Malaysia for packaging and limited assembly — a practice known as transshipping.
That pattern made it look like US imports from China had dropped, but enabled Beijing to continue growing its manufacturing sector in ways that could challenge US factories and employment.
India helping China evade US tariffs?
Peter Navarro, the White House trade adviser, told reporters on a conference call that China is laundering its exports through more than 40 countries, though he claimed that the issues raised in the report were really more about other nations enabling the avoidance of tariffs.
In a report, ‘The Great Transshipment Scam’, 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,” Navarro was quoted by AP as saying.
The report alleged that the countries that comprise China’s ‘Shadow Transshipment Network’ include many of America’s largest trading partners, ranging from Mexico and Canada on US land borders to the European Union, India, Japan, and South Korea.
“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.
The report categorises the 40-plus nations into three tiers, news agency ANI reported.
India is placed in Tier 1 (“Diversified Scale Leaders”) alongside major economies like Canada, the European Union, Israel, Japan, Mexico, South Korea, and Taiwan, described as large industrial bases where transhipment risks are embedded within legitimate trade.
Tier 2 (“Significant Economic Integration with China”) includes Brazil, Indonesia, Malaysia, Thailand, Turkey, and Vietnam, while Tier 3 (“Small, Opportunistic Targets”) includes Bangladesh, Cambodia, the Philippines, Singapore, Sri Lanka, and the UAE.
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.
also explicitly named India during a briefing, warning that as the US imposes higher tariffs, it will deter countries like from attempting transhipment.
“This is about the 40-plus countries that are enabling the transshipping, and as we impose higher tariffs on other countries, India, Vietnam, down the line, they’re going to try this transhipment too,” said, as per ANI.
He added, “Our message is simply that the way to pay less is not to cheat; it is to stop dumping, respect intellectual property, drop your barriers to American goods and move towards reciprocity. Our warning to the lower tariff countries facilitating and enabling the transshipping is this: preferential access to the American market is not a license to launder somebody else’s exports.”
The report pegs the annual value of illegally transshipped goods anywhere in the range from approximately $40 billion to $303 billion, depending on the methodology and definition used.
The crackdown coincides with complex trade talks between Washington and New Delhi regarding a reciprocal tariff deal, further complicated by US pressures concerning India’s purchases of Russian oil.
Anti-transhipment penalties
The US Trade Representative’s office confirmed, according to ANI, that anti-transhipment clauses are now being written into every new deal, with penalties for countries that allow disguised Chinese goods through their ports.
Officials were quoted as saying that these clauses would be enforced according to their “spirit”, meaning countries could face penalties even without a clear-cut violation.
Officials outlined three measures: an executive order strengthening enforcement powers at US Customs and Border Protection (CBP); a new AI-driven monitoring system dubbed a “detective border” that screens shipments for transhipment risk before they reach US ports; and anti-transhipment clauses written into future trade agreements, including any deal with India, ANI reported.
Under the plan, if a shipment is found to have been transshipped, the CBP will be able to retroactively claim tariffs on a company’s shipments over the previous year, not just the consignment in question.
Although briefing officials repeatedly stressed that the report “is not about China” specifically, they named Vietnam, Cambodia, Malaysia, Indonesia, and the Philippines as key transhipment hubs and said other high-tariff countries would likely follow suit.
