White House report details ‘Great Transshipment Scam’ costing tens of billions in tariff evasion

After the imposition of tariffs on nations with severe trade imbalances with the U.S., the Trump administration is moving aggressively to close loopholes that allow foreign exporters to undercut American workers, manufacturers and taxpayers through illegal transshipment. 

"Transshipment is driven by tariff arbitrage: When a product from one country faces a higher U.S. tariff than it would from another country, the difference becomes a profit opportunity, and even a business model in its own right," Peter Navarro, Director of the Office of Trade and Manufacturing Policy, wrote about the scheme. 

A White House report released Thursday and authored by Navarro describes the widespread practice in which goods from higher-tariff countries, primarily China, are routed through more than 40 lower-tariff jurisdictions to evade U.S. duties, resulting in annual economic losses measured in the tens of billions of dollars, 

The document, titled “The Great Transshipment Scam,” states that exporters take advantage of differences in U.S. tariff rates across countries by engaging in relabeling, repackaging, re-invoicing, minor processing or false country-of-origin claims. “Illegal transshipment may involve relabeling, repackaging, re-invoicing, minor processing, false country-of-origin claims, or other actions intended to secure tariff treatment that would not apply if the goods’ true economic origin were declared,” the report says.

Scale and historical context: As much as $303 billion

According to Navarro, who also serves as Assistant to the President, the practice intensified after the imposition of Section 301 tariffs on China in 2018. 

Direct U.S. imports from China declined in subsequent years, while the combined share of imports from identified transshipment-risk countries rose. The report notes that not all of the shift reflects illegal activity; some stems from legitimate production and investment changes. However, the timing and magnitude support further scrutiny of rerouting.

The report identifies more than 40 countries linked to elevated risk. These range from major trading partners with diversified industries to smaller jurisdictions offering free-zone rules, bonded warehouses or preferential market access. 

The network includes both production-side operations, such as light assembly and finishing, and logistics-side activities, including warehousing and documentation changes.

Five estimates of the annual volume of potential illegal transshipment or related trade transfer range from approximately $40 billion to $303 billion, depending on the methodology used. The White House Council of Economic Advisers places the figure between $34.2 billion and $89.6 billion, with a midpoint of $60 billion. A central estimate of about $75 billion comes from private-sector analysis of product-level and shipment data. The Department of Commerce cites a broader $109 billion trade-transfer benchmark and about $67 billion through leading hubs in 2025.

Economic impacts: 450,000 jobs displaced, $150 billion in reduced annual GDP, and as much as $26 billion in associated federal revenue losses 

Applying illustrative tariff differentials of 25, 35 and 45 percent, the report calculates annual tariff-revenue losses ranging from roughly $10 billion in the narrowest case to more than $100 billion in the broadest. Central estimates place the losses in the tens of billions of dollars.

Under a central case of $75 billion in annual illegal transshipment, the report estimates approximately 450,000 jobs displaced, $113 billion to $150 billion in reduced annual gross domestic product, and $19 billion to $26 billion in associated federal revenue losses. These are model-based illustrations rather than direct observations. Effects are concentrated in manufacturing sectors including electrical equipment, integrated circuits, plastics and motor components, with corresponding pressure on specific U.S. industrial regions.

“Every dollar lost to this Great Transshipment Scam is a dollar stolen from American workers, manufacturers, and taxpayers,” the report states.

The Trump Administration's response

The Trump administration has incorporated anti-transshipment measures into its Agreements on Reciprocal Trade, which include provisions allowing rules of origin to prevent benefits from accruing substantially to third countries. In 2026, President Donald Trump signed Executive Order 14411, strengthening customs enforcement through requirements on importer accountability, bonding, ownership disclosure, penalties and trade transparency.

The report also outlines an AI-enabled “Detective Border” system for U.S. Customs and Border Protection. It would integrate shipment data, routing histories, product classifications, ownership relationships, production-capacity indicators, anomaly detection and computer vision to help distinguish legitimate nearshoring from pass-through trade and to target high-risk shipments for interdiction and duty collection.

Why tariffs in the first place

In the modern era, the U.S. has run persistent trade deficits since 1976, with the goods deficit hitting a record $1.2 trillion in 2024.

After China’s WTO entry in 2001, the bilateral goods deficit exploded, reaching hundreds of billions annually and linked by the Economic Policy Institute to 3.4 million lost U.S. jobs (mostly manufacturing) through 2015.  

Even as the China gap narrowed somewhat, deficits shifted to Mexico, Vietnam, and others, sustaining overall losses, factory closures, and eroded industrial capacity amid claims of currency practices and subsidies.  

These imbalances left the U.S. as a net debtor while trading partners accumulated surpluses.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​