The US has admitted that its efforts to restrict imports from China with higher tariffs during President Donald Trump failed as trade shifted and has put 40 countries, including India on notice with allegations of facilitating transshipments of Chinese products to its markets.
It placed India in the group of Tier 1 countries—comprising also Canada, the European Union, Israel, Japan, Mexico, South Korea, and Taiwan—where “illegal transshipment risk is embedded within broad legitimate trade flows.”
While a report — “The Great Transshipment Scam” — released by White House stops short of recommending immediate punitive measures, it lays the groundwork for potential trade enforcement actions or leverage in future bilateral trade talks.
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The report rests on the fact that higher tariffs have brought down imports from China but led to higher imports from other geographies. Based on this, it assumes that Chinese goods are either being shipped through other countries after re-labeling or slight modification or light assembly. Trade experts, however, said substantial Indian manufacturing capacity exists in the product groups listed in the report.
Enforcement Proposals
The US report suggests strengthening transshipment enforcement and using Artificial Intelligence to support US Customs and Border Protection (CBP) ability to distinguish legitimate nearshoring and foreign investment from illegal pass-through trade, identify high-risk shipments, and convert analytical findings into interdiction, duty collection, penalties, and exclusion.
Quoting US government agency’s estimates, it says that $67 billion in U.S.-bound goods were transshipped from China through the top hubs—Mexico, India, and Vietnam—in 2025, producing an estimated $28 billion in lost tariff revenue.
The savings in tariffs enable financing the capital equipment, logistics infrastructure, light assembly plants, repackaging operations, and “screwdriver factories” needed to support the scam across Southeast Asia, Mexico, India, and Eastern Europe. The two products identified in the case of India are – pumps and compressors originating from Chennai-Pune-Gujarat.
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The report suffers from many weaknesses and India should ask the US to disclose the country, product and shipment level basis of its allegations, including India’s share of the $ 67 billion estimate, founder of Global Trade Research Initiative (GTRI) Ajay Srivastava said.
According to GTRI, in FY26, India exported liquid pumps worth $1.61 billion globally, including $414.5 million to the US, while importing $326.4 million from China. India also exported air pumps and gas compressors worth $1.48 billion globally, including $335.4 million to the US, while importing $1.63 billion from China.
Other countries named in the report have different levels of integration with the Chinese economy.
India’s economic reliance on China has been building steadily with a trade deficit in 2025-26 at $ 112.16 billion. These imports provide critical raw materials such as lithium, cobalt, nickel, graphite, rare earth elements and copper that are essential inputs for clean energy technologies, electric vehicles, electronics and semiconductors. Further imports of intermediate goods, capital equipment, and advanced technologies support domestic production particularly in strategic sectors such as energy, pharmaceuticals, fertilizers, electronics and advanced manufacturing besides facilitating infrastructure development.
TOPICSexportsThis article was first uploaded on August fourteen, twenty twenty-six, at eight minutes past ten in the night. © The Indian Express (P) Ltd