Key facts
- The Trump White House estimates annual tax revenue losses of $19 billion to $26 billion due to countries evading U.S. tariffs.
- The report identifies China as a primary user of transshipping, routing goods through third countries to avoid tariffs.
- This practice allows countries to continue exporting goods to the U.S. while appearing to comply with tariff regulations.
- White House trade adviser Peter Navarro stated that over 40 countries are involved in this 'transshipment scam'.
- The U.S. Customs and Border Protection is piloting an AI program to identify and penalize transshipped goods.
- Imports with falsified origins can face retroactive tariffs.
The Trump White House has reported that countries are circumventing U.S. tariffs by routing their exports through third nations, a practice known as transshipping. This strategy is estimated to result in annual tax revenue losses ranging from $19 billion to $26 billion.
The report specifically points to China's response to tariffs implemented in 2018, where goods were sent to countries like Mexico and Malaysia for packaging and limited assembly. This practice made U.S. imports from China appear to decrease, while allowing Beijing to continue expanding its manufacturing sector in ways that could potentially harm American industries and employment.
White House trade adviser Peter Navarro stated that China is using over 40 countries to launder its exports, emphasizing that the issue is more broadly about other nations enabling tariff avoidance. He indicated that new trade frameworks being developed by the administration will include provisions to penalize trade partners that engage in transshipping.
Navarro also suggested that other nations, such as India, could potentially use similar methods to avoid new tariffs. The administration has been imposing significant tariffs on global trade in an effort to protect U.S. manufacturers, though these tariffs have also contributed to inflationary pressures domestically.
To combat transshipments, U.S. Customs and Border Protection has initiated a prototype program utilizing artificial intelligence. Importers found to have falsified the origin of goods may face retroactive tariffs dating back approximately one year. The report's estimates for the scale of transshipped goods range from $34.2 billion to $303 billion annually, with a central figure of $75 billion used to calculate the lost tax revenues.