The United States faces a growing challenge from the illegal transshipment of goods through third countries to evade applicable tariffs and other trade remedies. Exporters in higher-tariff jurisdictions can abuse differences in U.S. tariff treatment across countries to route goods through lower-tariff jurisdictions before entering the American market. 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.
President Trump's tariff actions have helped to protect U.S. workers and industry, and his Administration has taken stronger actions against countries that pose larger economic challenges. However, the expansion of differentiated tariffs in 2025 has significantly increased the importance of effective transshipment enforcement. Tariff differentials are necessary to address differences in trading practices and levels of reciprocity, but they also create opportunities for arbitrage and evasion. Any higher-tariff country may seek access to the U.S. market through a lower-tariff country, and any lower-tariff jurisdiction may benefit from serving as a production, processing, warehousing, or logistics intermediary for higher-tariff countries.
China provides the most developed historical example of this conduct. Following the imposition of Section 301 tariffs in 2018, the direct U.S. trade deficit with China fell in 2019 and 2020. Even today, imports of a number of Chinese products subject to these original duties, like electric vehicles, are much lower in the U.S. than in places like the European Union. But the overall success of these tariffs co-exists with the abuse, by exporters, of the tariff differentials that they contribute to. After their imposition, Chinese exporters increasingly routed goods through third countries. Products that previously moved directly from China to the United States were shipped through jurisdictions where limited assembly, finishing, repackaging, relabeling, or documentation changes could create the appearance of a different national origin. Over time, these practices contributed to the development of a global network of production hubs, logistics platforms, freetrade zones, bonded warehouses, processing corridors, and re-export centers.
This report identifies more than 40 countries associated with elevated illegal transshipment risk. These jurisdictions vary significantly in economic scale and function. Some are major trading partners with diversified industrial bases and large volumes of overall commerce. Others are closely integrated into China-linked production and supply networks. A third group consists of smaller jurisdictions that offer specific advantages, including low labor costs, permissive free-zone rules, strategic port access, bonded warehousing, limited customs capacity, niche assembly operations, or preferential access to the U.S. market. The network operates through both production-side and logistics-side channels. Production-side nodes may perform light assembly, finishing, testing, packaging, labeling, inspection, or component integration before export to the United States. Logistics-side nodes may primarily provide routing, consolidation, warehousing, re-invoicing, relabeling, or new export documentation. Effective enforcement therefore requires distinguishing legitimate manufacturing and substantial transformation from pass-through trade and origin shifting. The available data show a substantial reallocation of U.S. import sourcing following the 2018 tariffs. As China's direct share of U.S. goods imports declined, the combined share supplied by identified transshipment countries increased. This relationship does not establish that all displaced Chinese trade was illegally transshipped. Some of the shift reflects legitimate changes in production, investment, and sourcing. However, the timing, magnitude, and direction of the two
trends support further investigation of the extent to which tariffed goods were rerouted through third countries.
This report reviews five government and private-sector estimates of potential transshipment or related trade-transfer exposure. The estimates range from approximately $40 billion to $303 billion annually, depending on the methodology and definition used. Goldman Sachs provides the narrowest estimate by isolating the rerouting channel. The White House Council of Economic Advisers estimates potential illegal transshipment in a range of $34.2 billion to $89.6 billion, and this report uses a rounded midpoint of $60 billion. Exiger develops a central estimate of approximately $75 billion based on product-level and shipment-flow analysis. The Department of Commerce identifies a broader $109 billion trade-transfer benchmark and separately estimates approximately $67 billion in 2025 illegal transshipment through leading hubs. Altana's $303 billion estimate represents a broad upper-bound exposure measure. These estimates are not additive and are not directly comparable. They use different datasets, methodologies, product screens, and definitions of illegal transshipment. Nevertheless, they converge on the conclusion that the scale of potential tariff evasion and origin shifting is economically significant.
Applying illustrative tariff differentials of 25, 35, and 45 percent produces annual tariff-revenueloss estimates ranging from approximately $10 billion under the narrowest case to more than $100 billion under the broadest exposure case. The report's central estimates indicate annual tariff losses in the tens of billions of dollars. These calculations understate losses in product categories subject to additional antidumping and countervailing duties, where the total avoided duty can substantially exceed ordinary tariff rates. The report also estimates broader economic effects associated with displaced domestic production. 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 figures are model-based estimates rather than observed job counts. They are intended to illustrate the potential scale of the economic exposure.
The effects are concentrated in specific manufacturing sectors and communities. The report links foreign illegal transshipment-risk corridors to U.S. industrial regions producing similar goods, including electrical equipment, integrated circuits, pumps, compressors, plastics, thermostats, cable assemblies, aluminum products, and motor components. These comparisons illustrate how tariff evasion can translate into lost orders, reduced capacity utilization, and employment pressure in American manufacturing communities.
The Trump Administration has taken steps to strengthen transshipment enforcement. Agreements on Reciprocal Trade include provisions designed to prevent agreement benefits from accruing substantially to third countries. Executive Order 14411 (Customs EO) strengthens customs enforcement by addressing importer accountability, bonding, domestic assets, ownership disclosure, business affiliations, good-standing requirements, penalties, and trade transparency. The report also outlines an AI-enabled "Detective Border" that would support U.S. Customs and
Border Protection (CBP) by integrating shipment data, routing histories, product classifications, ownership relationships, production-capacity indicators, anomaly detection, computer vision, and other analytical tools.