White House says tariff evasion costs US up to $26 billion a year
A White House report estimates $19-26 billion annual revenue loss from tariff evasion via transshipment, with China named as a key user.
The Trump administration has released a report estimating that the United States loses between $19 billion and $26 billion in tariff revenue each year because countries route exports through third nations to avoid import taxes. The practice, known as transshipping, involves sending goods to intermediary countries for packaging or limited assembly before they reach the U.S., making it appear that the goods originate from those third countries.
The report specifically points to China's response to tariffs imposed in 2018, when Beijing began shipping products through countries such as Mexico and Malaysia. This allowed Chinese manufacturers to continue expanding their output, even as official U.S. import figures from China appeared to decline. The report warns that this pattern undermines the intended protection for American factories and jobs.
White House trade adviser Peter Navarro told reporters that China is "laundering" its exports through more than 40 countries. He described the practice as a "great transshipment scam" and said the administration's new trade agreements will include penalties for partners that engage in such evasion. Navarro also noted that other nations, including India, could resort to similar tactics.
The report cites various government and private estimates, suggesting that between $34.2 billion and $303 billion worth of goods are transshipped annually, with a central figure of $75 billion used to calculate the revenue loss. To counter this, U.S. Customs and Border Protection has launched a prototype program using artificial intelligence to detect falsified origins. Importers found to have misrepresented a product's source can face retroactive tariffs covering roughly a year.
The administration's tariffs have faced legal challenges, and the Supreme Court overturned some of them in February. While the U.S. trade deficit remains large, it has narrowed this year to $371 billion, about $189 billion less than the same period last year.