US Accuses India, 40+ Nations of Helping China’s 'Shadow Trade' Network To Evade Trump Tariffs

New Delhi: The United States has accused India and more than 40 countries of being part of what it described as a “shadow transshipment network” allegedly helping Chinese exporters bypass steep US tariffs by routing goods through third countries.

The allegations were detailed in a White House report titled “The Great Transshipment Scam”, released by the Office of Trade and Manufacturing Policy. US trade adviser Peter Navarro said Chinese exporters have for years used third countries to disguise the origin of goods and gain access to the American market while avoiding tariffs imposed on Chinese products.

India Named Alongside Major US Trading Partners

According to the report, the network includes more than 40 countries, among them some of Washington's largest trading partners, including India, Canada, Mexico, the European Union, Japan and South Korea.

The US alleges that Chinese goods are routed through intermediary countries where they may undergo limited processing, assembly, repackaging or relabelling before being exported to the US with a different declared country of origin.

Washington has described the practice as a way of undermining US tariff policy and allowing Chinese manufacturers to retain access to the American market despite higher duties on direct imports from China.

The White House report estimates that the value of goods involved in illegal transshipment could range from $40 billion to as much as $303 billion annually, depending on the methodology used. A central estimate puts the figure at around $75 billion, with the US potentially losing $19 billion to $26 billion in tariff revenue every year.

US Plans AI-Powered Crackdown

The Trump administration is now preparing to use artificial intelligence to identify and investigate suspected tariff evasion.

The proposed system, known as “Detective Border”, is expected to analyse shipment data, trade routes, product classifications, ownership links and other supply-chain information to identify suspicious discrepancies in declared origins.

The system could also use tools such as computer vision and cargo imaging to help US Customs and Border Protection identify shipments that may have been falsely declared.

Navarro has warned countries and companies against exploiting the system, saying the initiative is intended as a warning to those attempting to circumvent US trade measures.

What Is Transshipment?

Transshipment is not inherently illegal. Goods can legitimately pass through another country during international trade.

The US concern is over illegal transshipment, where products manufactured in one country-particularly China-are allegedly rerouted through another country and given a new or misleading country-of-origin designation to avoid tariffs.

The practice became more prominent after the Trump administration imposed major tariffs on Chinese imports in 2018, according to the White House report.

India-US Trade Ties Face Another Challenge

The US allegations come at a sensitive time for India-US trade relations, with the two countries already navigating disagreements over tariffs and market access.

India was recently placed in a 10 per cent US tariff category under a separate Section 301 action concerning forced-labour enforcement, after Washington had initially considered a higher rate.

The latest transshipment allegations could add another layer of complexity to ongoing trade discussions between New Delhi and Washington, particularly if US authorities increase scrutiny of Indian supply chains and exports.

The White House, however, has not alleged that every shipment passing through the countries named in its report is illegal. Rather, it has identified them as locations associated with elevated transshipment risks and potential routes used to bypass US tariffs.

The administration is also seeking to strengthen customs enforcement and incorporate anti-transshipment safeguards into trade agreements as it attempts to prevent Chinese exporters from circumventing its tariff regime.

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