Why the White House’s China Transshipment Claims Look Like a Red Herring

The White House report, The Great Transshipment Scam: Rise, Scope, and Costs, released on August 13, 2026, accuses Chinese exporters of routing goods through more than 40 countries to evade higher US tariffs. 

The 25-page report was prepared by the White House Office of Trade and Manufacturing Policy, headed by Peter Navarro.

Its central argument is that the Section 301 tariffs imposed on China since 2018 reduced direct Chinese exports to the US but encouraged a global transshipment industry. 

Chinese goods are allegedly relabelled, repackaged, re-invoiced or subjected to minor processing in lower-tariff countries before entering the US under a different origin. The report calls this the “Shadow Transshipment Network.”

It cites five estimates of annual transshipment or related exposure: $40 billion by Goldman Sachs, $60 billion by the White House Council of Economic Advisers, $75 billion by Exiger, $109 billion by the US Commerce Department and $303 billion by Altana. These estimates measure different activities and are not directly comparable.

The report’s deeper purpose appears to be to shift attention from the failure of Trump’s US tariff policies to alleged evasion by other countries.

US imports from China fell from $525.8 billion in 2017 to $327.5 billion in 2025. However, total US imports rose sharply from $2.41 trillion to $3.50 trillion.

The US therefore replaced many Chinese finished goods with imports from other countries rather than with domestic production. Trump’s tariffs changed the source of imports but failed to reduce America’s overall dependence on imported goods.

China has adapted more successfully. Instead of exporting only finished products directly to the US, it increasingly supplies components and intermediate goods to manufacturers in Mexico, Vietnam, India and several European and Asian economies. These inputs are processed, assembled or incorporated into new products before being exported to the US.

Where such processing results in substantial transformation, these are genuine exports of the manufacturing country and an established feature of global value chains. They cannot be treated as Chinese transshipment merely because they contain Chinese inputs. China has, in effect, responded to US tariffs by strengthening its position as a global supplier of intermediate goods.

Aggregate data also fail to prove widespread rerouting. Between 2017 and 2024, Mexico’s exports to the US increased by $194.2 billion, while its imports from China rose by only $54.3 billion. Vietnam’s exports to the US increased by $94.1 billion against a $90.2 billion increase in imports from China. India’s exports to the US rose by $40.7 billion, while its imports from China increased by $52.4 billion, but most of it was consumed locally.

Chinese imports may serve domestic consumption, genuine manufacturing or exports to countries other than the US.

India Named
India is placed in Tier 1 alongside Canada, the EU, Israel, Japan, Mexico, South Korea and Taiwan. The report cites a US Commerce estimate that $67 billion of goods were transshipped through India, Mexico and Vietnam in 2025, causing $28 billion in tariff losses. It does not disclose India’s share, identify an Indian exporter or cite a fraudulent shipment.

The report specifically targets India’s Pune–Gujarat–Chennai corridor for pumps and compressors under HS 8413–8414. However, GTRI’s examination shows substantial Indian manufacturing capacity in these product groups. In 2025-26, India exported liquid pumps worth $1.61 billion globally, including $414.5 million to the US, while importing $326.4 million from China. India also exported air pumps and gas compressors worth $1.48 billion globally, including $335.4 million to the US, while importing $1.63 billion from China.

India’s large global exports weaken any presumption that its US shipments are simply Chinese goods being rerouted.

Four Major Gaps
First, it stretches the technical meaning of transshipment—normally the unloading and reloading of unchanged cargo—to cover assembly, testing, finishing and component integration. It thereby mixes origin fraud with legitimate manufacturing. This risks presenting legitimate processing and global supply-chain production as transshipment before any violation is proved.

Second, it treats trade correlation as evidence. A decline in direct imports from China and an increase from another country do not establish that the same goods were relabelled.

Third, country-specific US tariffs created the large tariff gaps that make evasion profitable. The WTO’s most-favoured-nation principle generally requires a member to apply the same tariff to all WTO partners, except under permitted arrangements such as free-trade agreements. This limits the benefit of falsely declaring one country’s product as originating in another. By imposing sharply different country-specific tariffs outside normal MFN treatment, the US has created large tariff gaps and stronger incentives for evasion.

Fourth, the US already applies strict non-preferential origin rules based on substantial transformation. Yet the report says these rules remain complex, inconsistent and open to misuse, and calls for tougher statutory standards. This could increase uncertainty and compliance costs for legitimate manufacturers using imported inputs without necessarily improving the detection of deliberate customs fraud.

The proposed AI-enabled “Detective Border” could lead to more inspections, shipment delays, retrospective duties and penalties.

India Stand
India should ask the US to disclose the country-, product- and shipment-level basis of its allegations, including India’s share of the $67 billion estimate. It should also investigate pumps and compressors by matching firm-level Chinese imports with US-bound exports and verifying domestic value addition. This would detect any misuse, protect legitimate exporters and allow India to challenge unsupported allegations with credible evidence.