The White House released a report Thursday identifying a widespread practice of foreign exporters routing goods through third countries to evade U.S. tariffs, with the administration estimating the scheme costs American taxpayers between $19 billion and $26 billion annually in lost Treasury revenue.
The 25-page report, titled "The Great Transshipment Scam," was produced by the White House Office of Trade and Manufacturing Policy under trade adviser Peter Navarro. It identifies more than 40 countries as posing high transshipment risk, including China, Panama, Mexico, Colombia, Brazil, Argentina, Chile, Peru, Costa Rica, and the Dominican Republic.
Transshipment involves routing goods through an intermediary country before entering the United States under a different country of origin designation, potentially qualifying products for lower tariff rates. The practice allows foreign exporters to circumvent duties imposed under Section 301 tariffs that were levied on Chinese goods beginning in 2018.
What the Right Is Saying
Republican lawmakers largely praised the report as exposing what they characterize as a systematic effort by China and other nations to circumvent American trade law.
"For years, communist China has laundered its exports through third countries to steal from American workers and dodge our tariffs," said Peter Navarro in comments reported by the Associated Press. "This administration is finally putting an end to the great transshipment scam."
Conservative trade advocates argue that stronger enforcement mechanisms are essential to making existing tariff regimes effective. The report notes that U.S. Customs and Border Protection has begun deploying artificial intelligence in a prototype program designed to detect transshipment schemes, with importers found falsifying product origins facing potential retroactive tariffs extending roughly one year back.
What the Left Is Saying
Democratic lawmakers have expressed cautious support for stronger enforcement against transshipment but have raised concerns about potential impacts on legitimate trade partners and American consumers facing higher prices.
"Transshipment is a real problem that has gone underenforced for too long," said Senator Sherrod Brown of Ohio. "We need to make sure any response protects American workers and doesn't end up being a tax on middle-class families through higher consumer prices."
Progressive economists have noted that while the administration's concerns about tariff evasion are valid, addressing the issue requires modernizing customs enforcement rather than simply imposing additional tariffs that could trigger retaliatory measures against U.S. exports.
What the Numbers Show
The White House report estimates annual Treasury losses from tariff-avoiding transshipment at between $19 billion and $26 billion. Government and private-sector estimates cited in the report value goods transshipped to avoid tariffs at approximately $34.2 billion to $303 billion annually, reflecting uncertainty in calculating the full scope of the practice.
Following the imposition of Section 301 tariffs on China in 2018, the direct U.S. trade deficit with China decreased in 2019 and 2020. However, the report notes that Chinese exporters subsequently increased routing goods through third countries where minimal assembly, finishing, repackaging, relabeling, or documentation changes could create the appearance of a different national origin.
The report documents the development of what it describes as a global network of production hubs, logistics platforms, free-trade zones, bonded warehouses, processing corridors, and re-export centers facilitating transshipment practices.
The Bottom Line
The White House report arrives ahead of a planned September visit to Washington by Chinese President Xi Jinping, following President Donald Trump's May trip to Beijing. Trade experts say the timing suggests the administration may use enforcement measures as leverage in upcoming bilateral negotiations.
Navarro indicated that new trade frameworks pursued by the Trump administration will include provisions penalizing trading partners engaged in transshipment practices. Importers found to have misrepresented product origins face retroactive tariff assessments, creating financial risk for companies involved in complex global supply chains.
American businesses and consumers may feel effects of enhanced enforcement through both potential price increases on affected goods and greater compliance requirements from customs authorities.