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White House Says Tariff Evasion Costs US Up to $26 Billion Annually/ TezzBuzz/ WASHINGTON/ J. Mansour/ The Trump administration estimates that countries avoiding U.S. tariffs through third-country shipments cost the government $19 billion to $26 billion annually. A new White House report accuses China of routing exports through more than 40 countries for limited processing before they enter the United States.
Customs officials are testing artificial intelligence to detect false origin claims as new trade agreements add penalties for transshipping.

Quick Look

• The White House estimates annual tariff revenue losses of $19 billion to $26 billion.
• The practice is known as transshipping.
• Goods are routed through third countries for packaging or limited assembly.
• China allegedly uses more than 40 countries in these arrangements.
• Mexico and Malaysia were cited as examples.
• The report estimates that $34.2 billion to $303 billion in goods may be transshipped annually.
• Its revenue-loss calculation is based on a central estimate of $75 billion in transshipped goods.
• India and other countries could also use the practice, according to Peter Navarro.
• Customs and Border Protection is testing AI to identify suspicious shipments.
• Falsified imports can face retroactive tariffs covering approximately one year.
• The Supreme Court overturned some of Trump’s tariffs in February.
• The U.S. trade imbalance stands at $371 billion so far this year.

Deep Look

White House estimates billions in lost tariff revenue

WASHINGTON — The Trump White House said that foreign countries are routing exports through third countries to evade U.S. tariffs, costing the federal government an estimated $19 billion to $26 billion in revenue every year.

A new administration report focused particularly on China’s response to tariffs imposed in 2018.

According to the report, Chinese goods were sent to countries including Mexico and Malaysia for packaging or limited assembly before being exported to the United States.

The practice, known as transshipping, can disguise a product’s true country of origin and allow importers to avoid tariffs directed at Chinese goods.

Transshipping obscured continuing Chinese production

Routing goods through other countries made it appear that U.S. imports from China had declined significantly.

The White House report argues that China was nevertheless able to continue expanding its manufacturing sector because its products were still reaching American buyers indirectly.

The administration says that expansion presents continuing challenges for U.S. factories and employment.

Navarro accuses China of using more than 40 countries

White House trade adviser Peter Navarro told reporters during a conference call that China is routing exports through more than 40 countries.

He argued, however, that the report’s broader focus was on the countries facilitating tariff avoidance rather than China alone.

Report released ahead of Xi Jinping’s visit

The findings were published before Chinese leader Xi Jinping’s planned visit to the United States in September.

President Donald Trump used flattering language to describe Xi during his own trip to Beijing in May.

China has characterized its relationship with the United States as one of “strategic stability.”

However, Chinese government policies supporting manufactured exports have disrupted automobile, metal and electronics industries in the United States, Europe, Japan and other markets.

Administration warns other countries may transship goods

Navarro said China is not the only potential source of tariff-evasion schemes.

He cited India as another country that could route products through third nations to avoid newly imposed U.S. tariffs.

The administration’s emerging trade frameworks will include provisions penalizing commercial partners that participate in transshipping, he said.

Those measures are intended to prevent countries from serving as intermediaries for goods that would otherwise face higher American import taxes.

Trump tariffs target allies and rivals

The Trump administration has imposed high tariffs on imports from much of the world as part of its effort to protect American manufacturers.

The import taxes have affected U.S. allies as well as economic and geopolitical rivals.

Although the tariffs are intended to support domestic production and increase government revenue, they have also created additional inflationary pressure inside the United States.

Importers frequently pass at least part of their tariff expenses to American businesses and consumers through higher prices.

Scale of transshipping remains uncertain

The White House report offered a broad range of estimates for the value of goods routed through third countries to avoid tariffs.

Using figures from the government and private sector, it estimated that between $34.2 billion and $303 billion in products could be transshipped each year.

The administration used a midpoint estimate of $75 billion in transshipped goods to calculate the projected loss of $19 billion to $26 billion in annual tariff revenue.

The wide range reflects the difficulty of identifying products whose origins have been deliberately misrepresented.

Customs tests artificial intelligence

Navarro said U.S. Customs and Border Protection has launched a prototype program that uses artificial intelligence to identify transshipment schemes.

The technology is intended to detect potentially false country-of-origin declarations and other suspicious shipping patterns.

When an importer is found to have falsified the origin of a product, U.S. authorities can impose tariffs retroactively on its imports dating back approximately one year, Navarro said.

Trump tariffs face continuing legal disputes

Tariffs imposed during Trump’s second term have been challenged in multiple lawsuits.

The Supreme Court overturned some of those import taxes in February, limiting parts of the administration’s trade agenda.

The White House has continued pursuing tariffs through other legal mechanisms while developing new trade frameworks with foreign partners.

US trade deficit narrows

The United States continues to import more goods and services than it exports.

The country’s trade imbalance has reached $371 billion so far this year.

That total is approximately $189 billion lower than the deficit recorded during the same period last year, suggesting that the gap between imports and exports has narrowed significantly.

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