Peter Navarro, the White House trade adviser, told reporters on a conference call that China is laundering its exports through more than 40 countries.
The Trump White House said in a new report on Thursday that countries are routing their exports through third countries to avoid US tariffs, estimating that there are tax revenue losses of $19 billion to $26 billion (around €16.5 billion to €22.6 billion) annually.
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Peter Navarro, the White House trade adviser, told reporters on a conference call that China is laundering its exports through more than 40 countries, though he claimed that the issues raised in the report were really more about other nations enabling the avoidance of tariffs.
“For years, the great transshipment scam has let communist China launder its exports,” Navarro said.
The report comes ahead of a planned September visit by Chinese leader Xi Jinping, who President Donald Trump described in flattering terms during his own visit to Beijing in May.
In response to increasing duties in 2018, China sent its goods to countries like Mexico and Malaysia for packaging and limited assembly, a practice known as transshipping, according to the research. Although Beijing was able to continue expanding its manufacturing sector in ways that could pose a threat to American firms and jobs, this trend gave the impression that US imports from China had decreased.
Beijing has described its relationship with Washington as one of “strategic stability", yet its government policies that support exports of manufactured goods have destabilised the auto, metals and electronics sectors in America, Europe, Japan and elsewhere.
New trade frameworks to penalise tariff evaders
Navarro stated that other countries, like India, might potentially transship to evade new duties and that the Trump administration's new trade frameworks would include clauses guaranteeing that trading partners who participate in the practice will face consequences.
The Trump administration has levied high tariffs on much of the world in hopes of protecting US manufacturers, hitting allies and rivals alike with import taxes. At the same time, those tariffs have created new inflationary pressures at home.
The report includes a range of estimates for the scale of transshipments to avoid tariffs, citing government and private sector numbers to estimate roughly $34.2 billion to $303 billion of goods (some €29.7bn–€263bn) transshipped each year.
It used a central figure of $75 billion worth of goods being transshipped to estimate how much in tax revenues have been lost.
According to Navarro, US Customs and Border Protection has begun using artificial intelligence in a pilot programme to halt transshipments in order to address the issue. According to Navarro, an importer's imports may be subject to retroactive tariffs stretching back about a year if it is discovered that the importer faked the provenance of a commodity.
The president’s tariffs during his second term have faced an array of legal challenges, with the Supreme Court overturning some of them in February. America continues to import more than it exports to the rest of the world, but the trade imbalance so far this year at $371 billion (about €322bn) is running about $189 billion (€164bn) lower than it did during the same period last year.