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U.S. Claims Dozens of Countries Helped China Evade Tariffs
More than 40 countries helped China evade U.S. tariffs by routing exports through nations with lower import levies, according to a report the Trump administration released August 13.
The report, titled “The Great Transshipment Scam,” says the U.S. faces “a growing challenge from the illegal transshipment of goods through third countries to evade applicable tariffs and other trade remedies,” describing the strategy as “fraud disguised in paperwork.”
The report analyzes the economic impact of trade transshipment on U.S. manufacturing, GDP, federal revenues, and employment, and frames it as a danger to the U.S. economy.
Key Findings & Economic Estimates• Methodology & Multipliers: o GDP Impact: Every $1 billion increase in the trade deficit is estimated to reduce annual GDP by roughly $1.5 billion to $2 billion once direct production losses, supply-chain effects, wage effects, and induced-consumption effects are factored in. o Manufacturing Multiplier: Domestic manufacturing has a value-added multiplier of 3.6, with manufacturing value chains accounting for roughly one-third of U.S. GDP and employment. o Federal Revenue Loss: Translating lost GDP to federal revenue using a 17% historical rule of thumb, every $100 billion in lost GDP implies roughly $17 billion in foregone federal receipts.
• Impact Scenarios: o Narrow Case: About 240,000 estimated jobs displaced; $60 billion to $80 billion in annual GDP loss; $10 billion to $14 billion in lost federal revenue. o Central Case: About 450,000 jobs displaced; $113 billion to $150 billion in annual GDP loss; $19 billion to $26 billion in lost federal revenue. o Broad Exposure Case: More than 1.8 million jobs displaced; more than $450 billion in annual GDP loss; $77 billion to $103 billion in lost federal revenue.
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Illegal transshipment may involve relabeling, repackaging, re-invoicing, minor processing, false country-of-origin claims, or other actions intended to secure tariff treatment that would not apply if the goods’ true economic origin were declared, the report said, supporting the report’s central claim.
According to BBC News, White House trade adviser Peter Navarro said the practice had cost “American jobs and billions in revenue.”The countries named include some of America’s biggest trading partners — Mexico, Canada, India, Japan, and South Korea.
A spokesperson for the Chinese embassy in Washington said: “Trade wars have no winners, and that it opposes the U.S. tariff measures and the use of state power to target China's companies.”“Any unilateral actions or agreements concerning transshipped goods must not target or harm the interests of third parties,” the spokesperson added.
According to government and private-sector estimates quoted by the White House, $30 billion to $300 billion in goods have been rerouted from higher-tariff countries to lower-tariff countries.
“What has changed in today’s Great Transshipment Scam is not simply the speed and scale of this modern form of smuggling, but the breadth, depth, and advancement of the global Shadow Transshipment Network through which China's tariff evasion now moves,” the White House wrote, supporting the report’s central argument.