Trump clamps down on tariff evasion, eyes China.

US Tariff Wave Targets Transshipment Schemes

Transshipment Rule Overview

In a fresh tariff initiative, the United States will impose an extra 40‑percent duty on products that are “transshipped”—sent through a third country to bypass higher U.S. import taxes. This approach is part of President Trump’s broader “reciprocal” tariff strategy aimed at curbing what Washington labels as unfair trade practices.

Global Reach of the New Tariffs

• The policy covers dozens of economies, from Taiwan to India.
• While specific countries are not singled out, China, with its extensive manufacturing network, is anticipated to bear the brunt.
• Analysts suggest that the measures are designed to encourage diversification away from China’s supply chains.

Experts on Short‑Term vs. Long‑Term Objectives

Josh Lipsky of the Atlantic Council notes that the initiative serves a dual purpose: short‑term tariff enforcement and a long‑term shift in supply‑chain structure. By creating a “fear” of higher rates, it aims to deter transshipment and foster domestic sourcing.

Richard Stern, Heritage Foundation, highlights how the policy acts as a “perpetual stick” in trade negotiations, pulling focus toward a global tightening of tariffs rather than singling out China.

Impact on Supply‑Chain Alternatives

• Vietnam has emerged as a major beneficiary of U.S. tariffs since 2018, gaining new manufacturing roles.
• Brookings Institution’s Robin Brooks points to a spike in transshipped Chinese goods in Southeast Asia in early 2025, coinciding with Trump’s tariff threats.
• Despite the surges, it remains unclear whether these products ultimately reach U.S. markets, casting doubt on the effectiveness of the strategy.

China’s Possible Reaction

Lipsky describes China’s perspective: the transshipment clause is perceived as a direct challenge to its trade dominance. With U.S. and China having recently lowered three‑digit tariffs in a temporary truce set to expire on August 12, the clause could strain the fragile thaw.

Negotiations are underway to possibly extend the easing, but ultimate decisions rest with the U.S. administration.

Challenges in Enforcement

• Defining the exact origin of goods across complex supply chains remains a formidable hurdle.
• Customs fraud, historically illegal, continues to pose challenges in accurately identifying transformed products.
• Customs authorities face significant pressure to detect transshipment and apply the heightened duties, especially in countries closely aligned with China.

Conclusion

The transshipment rule exemplifies the U.S. approach of using tariffs not only as a punitive tool but also as a mechanism to shape global trade patterns. Whether it achieves a sustainable decoupling from China, remains to be seen, pending enforcement efficacy and international cooperation.