U.S. Report Alleges Chinese Goods Are Routed Through More Than 40 Countries to Avoid Tariffs

The White House alleges that Chinese products are being routed through more than 40 countries to avoid higher U.S. tariffs, raising concerns about lost government revenue and the effectiveness of American trade enforcement.

According to the administration’s new report, some goods made in China are shipped to third countries—including locations ranging from Mexico to Malaysia—where they may be repackaged, relabeled or undergo limited processing before being exported to the United States.

The White House estimates that tariff circumvention costs the federal government approximately $19 billion to $26 billion annually, based on a central estimate of about $75 billion in potentially transshipped goods. The report cited a much wider estimated range, illustrating the difficulty of separating illegal evasion from legitimate international manufacturing and trade.

What Is Illegal Transshipment?

Shipping a product through another country is not automatically unlawful. Modern goods frequently pass through several countries during manufacturing and distribution.

The practice becomes illegal when businesses conceal a product’s actual country of origin, submit false documentation or perform only minimal work in another country to claim a lower tariff improperly. Goods that undergo a genuine and substantial transformation may legally acquire a new country of origin. The determination depends on the product, manufacturing process and applicable customs rules.

U.S. authorities have previously found circumvention involving particular industries. In a solar-panel investigation, the Commerce Department determined that certain Chinese producers routed products through Cambodia, Malaysia, Thailand and Vietnam for minor processing to avoid antidumping and countervailing duties. The Commerce Department published its final findings in 2023.

Countries Face Greater Scrutiny

White House trade adviser Peter Navarro said Chinese exports have moved through a network covering more than 40 countries. However, the publicly reported allegations do not establish that every government involved knowingly assisted tariff evasion.

In some cases, private exporters, intermediaries or importers may misuse a country’s ports and manufacturing networks without direct government involvement. Countries can also become legitimate manufacturing centers as businesses move production or diversify supply chains.

A Federal Reserve analysis of trade following the 2018–2019 tariffs found that increased Mexican exports to the United States largely reflected trade diversion and meaningful production rather than widespread simple transshipment. The researchers concluded that available data did not support claims of large-scale Chinese goods merely passing through Mexico. The Federal Reserve published the analysis in June 2026. That finding highlights the importance of examining individual products and transactions instead of treating all growth in third-country exports as evidence of fraud.

U.S. Expands Customs Enforcement

The administration has directed federal agencies to strengthen enforcement against illegal transshipment, misclassification and undervaluation. A June executive order instructed Customs and Border Protection and the Justice Department to prioritize such cases, increase audits and pursue applicable penalties.

Under existing U.S. policy, goods determined to have been transshipped to evade certain tariffs can face an additional 40% duty, along with other duties, fines and penalties. Customs officials are also testing artificial intelligence tools to identify suspicious trade patterns, such as sudden increases in exports from countries that lack the manufacturing capacity normally required to produce the goods.

Enforcement can include criminal prosecution. In January, the Justice Department announced that a New Hampshire businessman had pleaded guilty to participating in a scheme that falsely represented Chinese plastic resin as originating elsewhere to avoid tariffs. The Justice Department said false country-of-origin information was used in that case.

Implications for Businesses and Consumers

Importers are legally responsible for accurately declaring a product’s origin, classification and value. Companies relying on international supply chains may face increased documentation requirements, inspections and compliance reviews.

Stronger enforcement could protect U.S. manufacturers from unlawfully underpriced imports and recover unpaid duties. It could also increase costs and delays for legitimate businesses, potentially affecting prices for electronics, machinery, furniture, solar equipment and other imported products. The debate is likely to intensify as the United States negotiates trade arrangements requiring partner countries to prevent tariff circumvention.

The central challenge will be distinguishing deliberate evasion from lawful manufacturing conducted across several countries. While the administration describes the issue as a widespread international network, each allegation requires evidence showing that the declared country of origin was false or that processing failed to meet applicable legal standards.