Imagine this: you slap a hefty tariff on Chinese goods to protect American jobs and bring manufacturing back home. But instead of paying up, those goods simply take a detour—through Mexico, Canada, Vietnam, or any of dozens of other countries—get a quick relabel, and sail into the US as if they were “made elsewhere.”
That, according to a blistering new White House report, isn’t a hypothetical. It’s happening right now. And it’s costing the US Treasury between $19 billion and $26 billion every single year.
Welcome to the shadowy world of transshipment—and the Trump administration’s latest battle to shut it down.
The Report That Has the World on Notice
On Thursday, the White House Office of Trade and Manufacturing Policy released a report with a dramatic title: “The Great Transshipment Scam”. And its findings are nothing short of staggering.
The report, authored by White House trade adviser Peter Navarro, alleges that a sprawling global network is helping China evade US tariffs by routing its exports through third countries. These goods undergo minimal processing—think relabeling, repackaging, or light assembly—before being shipped to America under a different country’s origin label.
The scale? The report estimates that between $34 billion and $303 billion worth of goods are transshipped annually, with a “central case” estimate of $75 billion.
And the consequences go far beyond lost tax revenue.
The Economic Toll: Jobs, GDP, and the American Worker
Here’s where it gets personal. The White House report doesn’t just talk about abstract numbers—it connects the dots to real American livelihoods.
According to the central estimate, the transshipment scam is responsible for displacing roughly 450,000 US jobs, both directly and indirectly. The drag on the US GDP? Somewhere between $113 billion and $150 billion annually.
That’s not just a trade problem. That’s a jobs crisis, dressed up in shipping containers.
Navarro didn’t mince words when he briefed reporters. “This is basically a warning to the world—don’t try to cheat America,” he told Bloomberg Television. He also accused China of “laundering” its exports through more than 40 countries.
The “Shadow Network”: Who’s on the List?
The report names names—and some of them are surprising. The list of countries flagged as having an “elevated risk” of being part of this shadow transshipment network reads like a who’s who of US allies and trading partners.
The Tier 1 “Diversified Scale Leaders” include:
- Canada
- The European Union
- India
- Israel
- Japan
- Mexico
Other countries named include Brazil, Indonesia, Malaysia, Thailand, Turkey, Vietnam, and many more. In total, nearly 40 countries are identified as part of this network.
The report argues that these countries benefit handsomely from the arrangement. “Local firms capture assembly fees, warehousing revenue, logistics margins, port charges, customs brokerage income, land rents, and export-processing-zone investment,” it reads. “Governments benefit from jobs, tax receipts, foreign investment, and trade growth”.
But the US? It gets the short end of the stick.
How It Works: The Mechanics of the Scam
The mechanism is deceptively simple. When President Trump imposed high tariffs on Chinese goods during his first term, many businesses responded by diversifying their supply chains—a strategy known as “China +1”. But some took it a step further.
Instead of actually moving manufacturing, they simply shipped Chinese goods to intermediary countries, where they received minimal processing and a new “made in” label. From there, they entered the US duty-free or at significantly lower tariff rates.
Routing Chinese products through Mexico or Canada, for example, could eliminate duties entirely.
The result? Imports from China fell to a 16-year low of $308.7 billion in 2025. But imports from Mexico and Vietnam? They rose sharply. The tariff walls were working—but the water was simply flowing around them.
The “Detective Border”: AI Joins the Fight
So, what’s the plan to stop it?
The White House report reveals that the US Customs and Border Protection agency is now deploying AI-powered tools to detect suspected transshipment.
Think of it as a “detective border”. Machine learning models analyze everything from container markings and packaging patterns to X-ray imaging, flagging mismatches between what’s declared and what’s actually inside.
AI supply chain firm Exiger provided a mid-range estimate of $75 billion in illegally transshipped goods, which formed the basis for the lost revenue calculation.
The question is: will technology be enough to outsmart a global network of trade evaders?
China’s Response: A Warning of Its Own
Unsurprisingly, Beijing isn’t taking this lying down.
The Chinese embassy in Washington issued a statement opposing “any party seeking to strike a deal at China’s expense” or disrupting industrial supply chains. “Should such situations arise, China will resolutely take necessary measures to safeguard its legitimate rights and interests,” an embassy spokesperson said.
The rhetoric is heating up—and the stakes couldn’t be higher.
A Warning to the World
This report isn’t just an accounting exercise. It’s a shot across the bow—a signal that the Trump administration is serious about enforcing its trade policies, no matter who gets caught in the crossfire.
If enforcement succeeds, the potential $19 billion to $26 billion in recovered tariff revenue could have ripple effects across the global economy. Consumer prices may rise in categories like electronics and plastics, where tariff arbitrage has kept costs artificially low. Supply chains could tighten. And the geopolitical landscape could shift as countries are forced to choose sides.
Navarro’s report is, in many ways, a warning to the world: the era of tariff evasion is ending. The US is watching. And it’s bringing AI to the fight.
Whether that’s a promise or a threat depends entirely on which side of the shipping container you’re standing on.
What do you think? Is the US right to crack down on transshipment, or will this trigger a new wave of trade tensions? Drop your thoughts in the comments below.
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