Slap a tariff on Chinese goods, and apparently the response from Beijing isn’t always to pay it. Sometimes it’s to change the mailing address.
The Trump White House is putting a spotlight on what it calls the “Great Transshipment Scam” — a sprawling system in which goods can be routed through third countries, lightly processed, repackaged or relabeled and then shipped into the United States under a different country of origin.
And the administration says the tariff dodge could be costing the U.S. Treasury between $19 billion and $26 billion every year.
The new White House report identifies more than 40 countries as potential conduits for transshipment and points particularly to China, arguing Beijing developed an increasingly sophisticated network for rerouting exports after President Donald Trump imposed Section 301 tariffs during his first term.
“For years, the great transshipment scam has let communist China launder its exports,” White House trade adviser Peter Navarro said.
In other words, if the front door into the American market gets expensive, find a cheaper side entrance.
The report says the pattern accelerated after the 2018 tariffs. Chinese products that once traveled directly to the United States increasingly passed through countries where assembly, finishing, packaging or paperwork could alter — legitimately in some cases and fraudulently in others — how their country of origin was declared.
There is nothing inherently illegal about international supply chains or legitimate manufacturing performed in multiple countries. The administration’s target is illegal transshipment designed to conceal a product’s true origin and evade U.S. duties.
The White House says estimates of goods involved in tariff-avoiding transshipment range wildly, from roughly $34 billion to more than $300 billion annually. The administration used a central estimate to calculate the $19 billion-to-$26 billion potential annual revenue loss.
And China isn’t the only concern.
The administration has identified countries across Asia, Europe and the Americas as possible transshipment hubs, while Navarro has warned that other major exporters could employ similar tactics. The Financial Times reported that the White House’s list includes more than 40 countries and economies, including major U.S. trading partners.
Now comes the enforcement part.
Customs and Border Protection has been moving toward using artificial intelligence to spot suspicious shipments by examining supply chains and trade data for signs that a product’s declared origin doesn’t match reality.
That effort didn’t materialize overnight. CBP launched a solicitation earlier this year seeking AI-driven commercial technology specifically capable of identifying imports at high risk of illegal transshipment. The agency said such systems could help target enforcement and identify additional duties owed to the United States.
The administration’s new crackdown reportedly includes an AI system dubbed “Detective Border,” designed to analyze trade patterns and identify discrepancies involving shipment origins, routes and components.
Navarro says there can also be a nasty surprise waiting for importers caught falsifying where their merchandise originated, customs can assess duties retroactively.
That’s important because Trump’s tariff strategy only works as intended if Customs can determine where the goods actually came from. A 40% tariff isn’t much of a deterrent if a shipment can make a pit stop, acquire some new paperwork and waltz into America at a lower rate.
The administration has consequently begun writing tougher anti-transshipment provisions into trade arrangements and pushing tighter rules of origin.
The report arrives ahead of Chinese President Xi Jinping’s expected September visit to Washington, with trade remaining one of the biggest unresolved issues between the world’s two largest economies.
MY QUICK TAKE:
So that’s globalization’s magic trick.
A Chinese product goes into one country, somebody changes the box, moves a screw or two, fills out some paperwork — and presto! Apparently we’re supposed to forget where it came from.
Whatever you think about tariffs, this part should be pretty simple: If America sets a tariff on Chinese goods, China doesn’t get to beat it by playing international three-card monte with the shipping label.
Trump spent years talking about countries gaming America’s trade system. Now the administration says it has mapped out the back doors — and is giving Customs AI to start watching them. If the estimates are even remotely accurate, we’re not talking about pocket change. We’re talking about potentially tens of billions of dollars a year slipping through the cracks.
The tariff debate will continue. Fine. But cheating isn’t a trade policy. It’s cheating.
WIRE SOURCES:
- Fox News — “White House exposes ‘Transshipment Scam’ costing US up to $26B, points finger at China”
- Associated Press — “Trump White House says it’s losing $19B-$26B a year in revenue as countries dodge tariffs”
- Financial Times — “US accuses more than 40 countries of helping China avoid Donald Trump’s tariffs”
- CBP illegal-transshipment AI pilot — solicitation details
