A new White House report accuses China of routing goods through more than 40 countries to dodge U.S. tariffs, a scheme officials say costs the Treasury up to $26 billion a year.
The 25-page report, titled "The Great Transshipment Scam," lays out what the White House Office of Trade and Manufacturing Policy describes as a sprawling network of intermediary countries, free-trade zones, and bonded warehouses built to disguise the true origin of Chinese exports. The practice accelerated after the United States imposed Section 301 tariffs on China in 2018, Fox News Digital reported.
White House trade adviser Peter Navarro, who led production of the report, framed the issue in blunt terms. The report itself states that "after their imposition, Chinese exporters increasingly routed goods through third countries," building what it calls "a global network of production hubs, logistics platforms, free-trade zones, bonded warehouses, processing corridors, and re-export centers."
The direct U.S. trade deficit with China did fall in 2019 and 2020 after the original tariffs took effect. But the report argues that much of the apparent progress was an illusion, Chinese goods simply took a detour.
The financial scope of the alleged scheme is enormous. Government and private-sector estimates cited in the report put the total value of goods transshipped to avoid tariffs at between $34.2 billion and $303 billion annually. The central estimate, the Associated Press noted, lands around $75 billion. Lost tariff revenue alone runs between $19 billion and $26 billion a year, money that never reaches the U.S. Treasury.
The methods are straightforward. Exporters ship Chinese-made goods to a third country, Panama, Mexico, Colombia, Brazil, or one of dozens of others, where the products undergo limited assembly, finishing, repackaging, relabeling, or simple documentation changes. They then enter the United States under the intermediary country's name, qualifying for a lower tariff rate or avoiding duties altogether.
Navarro described the underlying incentive plainly. When a product from one country faces a higher U.S. tariff than the same product would from another country, the gap becomes a profit opportunity, "and even a business model in its own right," Just The News reported him saying.
The report names China as offering "the most developed historical example of transshipment." But Navarro also singled out India as a country that could use the same tactics to skirt U.S. duties. The full list of high-risk jurisdictions runs past 40 nations, including Argentina, Chile, Peru, Costa Rica, and the Dominican Republic.
The damage extends well beyond lost customs revenue. The White House report estimates that transshipment-driven tariff evasion has displaced roughly 450,000 U.S. jobs and reduced annual GDP by $113 billion to $150 billion. The report puts the point sharply: "Every dollar lost to this Great Transshipment Scam is a dollar stolen from American workers, manufacturers, and taxpayers."
That language reflects a broader pattern the Trump administration has identified across multiple fronts. The White House has moved aggressively to reduce American dependence on Chinese supply chains, from critical minerals to manufactured goods, treating the economic relationship as a strategic vulnerability rather than a simple trade question.
Navarro, speaking through the Associated Press, put it more colorfully:
"For years, the great transshipment scam has let communist China launder its exports."
The word "launder" is Navarro's characterization, but the mechanics the report describes are real and well-documented. Chinese exporters reroute goods through intermediary countries to create the appearance of a different national origin, then ship them to the United States at lower duty rates. The result is that American manufacturers compete against imports that never paid the tariffs designed to level the playing field.
The administration says it is not just naming the problem but acting on it. Navarro told reporters that U.S. Customs and Border Protection has begun using artificial intelligence in a prototype program to detect transshipment. The specifics of the AI tools and their vendors remain undisclosed, but the program represents a shift toward automated enforcement at the border.
Importers caught falsifying a product's country of origin already face consequences. Navarro said tariffs can be applied retroactively for roughly a year when fraud is discovered, meaning companies that thought they had gotten away with it can still receive a bill.
The enforcement push is already producing results in individual cases. A federal investigation into Milwaukee Tool, a Hong Kong-owned company, found that 91 percent of its shipments were not subject to Section 301 China tariffs despite the company maintaining its largest manufacturing footprint in China. CBP opened the probe in December 2024 after allegations the company was transshipping Chinese-made products through Taiwan and Vietnam. An enforcement action followed in November 2025, and Department of Homeland Security officials have suggested criminal charges may be forthcoming, the Washington Examiner reported.
The Trump administration launched a cross-agency "Trade Fraud Task Force" in August to coordinate tariff-evasion cases, with the Department of Justice and DHS working together on potential criminal referrals. "The President's America First Trade Policy supports American manufacturing by ending unfair trade practices," Assistant Attorney General Brett Shumate said.
Beyond enforcement, Navarro said new trade frameworks the administration is pursuing will include provisions to penalize trading partners that facilitate transshipment. The details of those provisions remain unclear, what specific penalties would apply, which agreements are being renegotiated, and on what timeline, but the intent is to shift the cost of evasion onto the governments that allow it.
The report's release comes at a diplomatically sensitive moment. President Trump visited Beijing in May, and Chinese President Xi Jinping has a planned visit to Washington in September. The timing of a 25-page document accusing China of orchestrating a global tariff-evasion network is unlikely to be coincidental. The White House appears to be laying down a public marker ahead of those talks, establishing the scope of the problem in terms that make concessions harder for Beijing to avoid.
The broader pattern of Chinese evasion tactics extends beyond tariffs into sanctions as well. Traders have rebranded over $1 billion worth of Venezuelan oil shipments as Brazilian crude to circumvent U.S. sanctions, with Chinese company Hangzhou Energy caught spoofing GPS signals to make vessels appear to be loading cargo in Brazil while actually operating off the Venezuelan coast, Breitbart reported. Falsified certificates of origin, phantom ship-to-ship transfers, and outright document fraud, the playbook is consistent whether the goal is dodging tariffs or sanctions.
Fox News Digital reached out to the White House for additional comment on the report but did not note receiving a response.
Several significant gaps remain. The wide range in the government's own estimates, $34.2 billion to $303 billion in transshipped goods annually, reflects genuine uncertainty about the scale of the problem. The methodology behind those figures has not been made public. The full list of 40-plus high-risk countries has not been released beyond the handful named in the report. And the AI prototype CBP is deploying to catch fraudulent shipments has not been described in enough detail to evaluate its effectiveness.
The administration has been willing to take on fights across multiple fronts simultaneously. The same White House that produced this trade report has also hosted events drawing legal challenges and managed high-stakes diplomatic meetings, all while pressing an aggressive trade agenda that treats tariff enforcement as a matter of national economic security.
For years, the assumption in Washington was that tariffs would change behavior. They did, just not in the way policymakers intended. Chinese exporters adapted, third countries profited, and American taxpayers picked up the tab. If the administration's new enforcement tools and trade provisions work, it will be because someone finally decided that writing rules is only half the job. The other half is making sure they cannot be gamed.