The Trump White House has released a report warning that foreign exporters are systematically routing goods through third countries to avoid US tariffs, costing the federal government an estimated $19 billion to $26 billion in lost tax revenue each year. The report, published on Thursday, identifies the practice of "transshipping" — sending goods through intermediary nations for repackaging or limited assembly before they are exported to the United States — as a growing threat to the administration's trade policy agenda.

China is singled out as the primary actor in the scheme. According to the report, Beijing responded to new US tariffs imposed in 2018 by redirecting its exports through more than 40 countries, ranging from Mexico to Malaysia. Although the arrangement created the statistical appearance of a decline in direct US imports from China, it allowed Chinese manufacturers to maintain and expand their output in ways that continue to pressure American industries, particularly in the automotive, metals, and electronics sectors — a pattern that has also rattled producers in Europe and Japan. White House trade adviser Peter Navarro described the practice in blunt terms, calling it "the great transshipment scam" and accusing third countries of enabling tariff evasion. He also warned that nations such as India could engage in similar behaviour.

The scale of the problem, as outlined in the report, carries significant uncertainty. Estimates for the total value of transshipped goods range widely, from $34.2 billion to $303 billion annually, with the administration using a central figure of $75 billion to calculate its revenue loss projections. To combat the problem, US Customs and Border Protection has launched a pilot programme using artificial intelligence to detect falsified country-of-origin declarations. Importers found to have misrepresented the origins of their goods can face retroactive tariffs going back approximately one year.

The report lands at a diplomatically sensitive moment. It precedes a planned September visit to Washington by Chinese President Xi Jinping, whom President Trump praised warmly during his own trip to Beijing in May. China has described the bilateral relationship as one of "strategic stability," though the report implicitly challenges that framing. Navarro indicated that future trade agreements negotiated by the administration would include explicit penalties for partners found to be facilitating tariff evasion.

The broader context adds complexity to the administration's position. Trump's second-term tariffs — applied broadly to allies and rivals alike — have faced repeated legal challenges, with the Supreme Court striking down some of them in February. While officials point to an improvement in the US trade deficit, which at $371 billion so far this year is roughly $189 billion lower than during the same period last year, economists and businesses have also flagged the inflationary pressures the import taxes have generated domestically. The transshipping report signals that the administration intends to tighten enforcement rather than soften its tariff strategy.