The Trump White House has reported that countries are evading U.S. tariffs by routing their exports through third nations, resulting in an estimated annual revenue loss of $19 billion to $26 billion. A report released Thursday highlights that China, in particular, has been sending goods to countries like Mexico and Malaysia for repackaging and minor assembly since new tariffs were imposed in 2018. This practice, known as transshipping, allows China to continue growing its manufacturing sector and potentially challenge American industries and employment.
White House trade adviser Peter Navarro stated that China is using over 40 countries to "launder its exports." He asserted that the issue extends beyond China, with other nations potentially engaging in similar practices to circumvent new tariffs. The Trump administration has implemented broad tariffs aimed at protecting U.S. manufacturers, affecting both allies and rivals, though these tariffs have also contributed to inflationary pressures domestically.
The report suggests that transshipments to avoid tariffs could range from $34.2 billion to $303 billion worth of goods annually. Using a central estimate of $75 billion in transshipped goods, the administration calculated the significant tax revenue deficit.
To combat this issue, U.S. Customs and Border Protection has begun employing artificial intelligence in a pilot program to detect transshipments. According to Navarro, importers found to have misrepresented the origin of goods may face retroactive tariffs applied for up to a year.
The administration's tariffs have faced legal challenges, with some being overturned by the Supreme Court. Despite these measures, the U.S. trade imbalance remains, though it has decreased this year compared to the same period in the previous year.