China's scam? How Beijing allegedly bypasses Washington's tariffs

A new report, "The Great Transshipment Fraud," accuses China of orchestrating a sophisticated scheme to circumvent U.S. tariffs by utilizing over 40 countries as conduits for its exports. Nations including Canada, Mexico, and Japan are allegedly facilitating this evasion by allowing Chinese goods to be re-exported through their territories under lower tariff rates.

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China has 'used' third countries to bypass Donald Trump's tariffs. How do they do it? They export goods, for example, to Japan, where minor alterations, changes of destination points, repackaging, or other cosmetic actions are carried out, which then – with further export – go to the USA as Japanese goods.

The alleged method involves minimal alterations to Chinese products in these third countries. This can include repackaging, minor modifications, or simply changing the declared destination. Once these cosmetic changes are made, the goods are exported to the United States, presented as originating from the intermediary country, thereby bypassing the punitive tariffs imposed by Washington.

The White House has indicated that China and state-backed manufacturers have exploited jurisdictions with lower tariffs, weaker customs controls, or preferential market access to the U.S. The report suggests that these countries have become launchpads for a new system of tariff avoidance, where goods primarily made in China are subjected to minimal processing abroad before entering the American market under new identities.

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Countries with lower tariffs, of which there are now more than 40, have become a launchpad and center for a new system of tariff avoidance. Goods produced mainly in China were subjected to minimal processing abroad and exported to America under new names.

According to the Trump administration's estimates cited in the report, this practice results in substantial financial losses for the United States. The U.S. reportedly loses between $19 billion and $26 billion annually due to these tariff circumventions. The document projects that an annual illegal transshipment value of $75 billion could lead to approximately 450,000 job losses and significant federal revenue shortfalls.

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According to the base scenario, with an annual illegal transshipment value of $75 billion, approximately 450,000 jobs will be lost as a result, and related federal revenue losses will range from $19 billion to $26 billion.

Peter Navarro, former head of the White House's trade and manufacturing department, described China's transshipment methods as "extremely sophisticated." He stated that this "great transshipment fraud" has allowed China to "launder" its exports, costing the U.S. Treasury tens of billions of dollars and stealing American workers' wages. The report does not specify what actions Donald Trump might take based on its findings.

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China has used 'extremely sophisticated' transshipment methods after Trump imposed tariffs.