US Flags India in China’s ‘Shadow Transshipment Network’ Accused of Helping Evade Trump Tariffs
The White House has named India as a key part of what it calls China’s “shadow transshipment network,” accusing more than 40 countries of helping Chinese exporters sidestep high US tariffs by routing goods through third nations that face lower duties. The allegations appear in a report titled “The Great Transshipment Scam,” released by the Office of Trade and Manufacturing Policy and championed by Peter Navarro, Counsellor to the President for Trade and Manufacturing.
According to the report, Chinese manufacturers have increasingly used third countries for limited assembly, finishing, repackaging, relabeling, reinvoicing, or simple routing changes. These steps create the appearance of a different national origin while leaving the underlying Chinese content largely intact. US officials describe the practice as “fraud cloaked in paperwork” that has grown more sophisticated since the original Section 301 tariffs were imposed on China in 2018.
India has been placed in Tier 1 of the network, labeled “Diversified Scale Leaders.” This category includes other major US trading partners such as Canada, Mexico, the European Union, Japan, South Korea, Israel, and Taiwan. In these economies, the White House says, transshipment risk is embedded within large volumes of otherwise legitimate trade. Tier 2 countries, such as Vietnam, show deeper integration with Chinese supply chains, while Tier 3 consists of smaller or more opportunistic hubs.
Estimates of the scale vary widely depending on methodology. The report cites figures ranging from roughly $40 billion to as high as $303 billion in annual value of goods potentially involved. A central estimate of about $75 billion corresponds to tens of billions of dollars in lost US tariff revenue each year. One narrower Commerce Department analysis put the volume of US-bound goods transshipped from China through the top hubs of Mexico, India, and Vietnam at approximately $67 billion in 2025, generating an estimated $28 billion in lost duties. Model-based calculations linked to a $75 billion figure also project broader economic effects, including hundreds of thousands of displaced American jobs and significant GDP losses concentrated in manufacturing regions.
The report singles out a specific Indian industrial corridor. It points to the Pune–Gujarat–Chennai production belt as a channel for pumps and compressors (HS codes 8413–8414). Officials claim these goods, originally Chinese, undergo limited processing or documentation changes in India before entering the US market under an Indian origin declaration. Navarro has stated bluntly that “a Chinese pump that leaves Pune as Indian is a pump not machined in Cincinnati, Dayton or Columbus,” linking the corridor to competitive pressure on manufacturing centers in Ohio.
Transshipment itself is not new. It traditionally refers to the transfer of cargo through an intermediate country on the way to its final destination. What the White House objects to is the alleged use of the practice to disguise Chinese origin and exploit differences in tariff rates. After the 2018 tariffs raised duties on a wide range of Chinese products, exporters began searching for lower-duty routes. Subsequent tariff adjustments under the current Trump administration have created further differentials between countries, increasing the financial incentive to reroute. The savings from avoiding higher China-specific rates, officials argue, are large enough to fund the light-assembly plants, logistics hubs, and “screwdriver factories” that support the network across Asia, Mexico, and elsewhere.
To counter the problem, the administration plans to deploy an AI-powered system referred to as the “Detective Border.” The tool is designed to analyze shipment data, routing histories, product classifications, ownership relationships, production-capacity indicators, and other signals. Combined with physical inspections, packaging reviews, and enhanced customs rules under a related executive order, the system aims to distinguish genuine manufacturing shifts and nearshoring from pass-through operations. Importers found to have misdeclared origin could face retroactive tariff assessments. Future trade agreements, including those under discussion with partners such as India, are expected to contain stronger anti-transshipment provisions that police both the letter and the spirit of rules of origin.
For India the designation carries both reputational and practical consequences. Indian exporters in machinery, electronics, and intermediate goods may face heightened scrutiny at US ports, more demanding documentation requirements, and the risk of delayed clearances or penalties if Chinese content is judged excessive. At the same time, the report acknowledges that Tier 1 risk sits inside large legitimate trade flows. India’s manufacturing expansion, industrial policy initiatives, and genuine diversification of supply chains away from pure dependence on China provide an alternative explanation for rising shipments in certain categories. Distinguishing one from the other will be difficult and will depend on how rigorously the United States applies its new detection tools.
The episode adds friction to the already complex US-India commercial relationship. The two countries continue to pursue closer strategic and defense ties while negotiating elements of a reciprocal trade framework. Origin rules have already featured in those discussions. The White House message is clear: preferential access to the American market is not a license to launder third-country exports. Navarro has warned that as tariffs rise on additional countries, others—including India and Vietnam—may be tempted to expand similar practices, and the United States intends to deter them.
Critics of the report note that global supply chains are highly interconnected. Many products legitimately incorporate components from multiple countries, and abrupt shifts in trade data after tariffs can reflect both evasion and real commercial adaptation. Indian officials have not yet issued a detailed public rebuttal to this specific document, though New Delhi has previously rejected what it views as inaccurate characterizations of its trade practices by the same adviser on other issues. The Indian government is likely to emphasize domestic value addition, compliance with existing rules of origin, and the growth of its own industrial base.
The “Great Transshipment Scam” report arrives at a sensitive moment. It comes weeks before a planned meeting between President Donald Trump and Chinese leader Xi Jinping and amid ongoing efforts to reshape global tariff structures. Whether the new AI tools and stricter enforcement succeed in shrinking the alleged network, or whether they simply raise costs and uncertainty for legitimate exporters in countries such as India, will become clearer in the months ahead. For now, the White House has put dozens of trading partners on notice that the era of easy origin shifting may be ending.
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