A new White House report claims Chinese exporters are routing goods through more than 40 nations to evade American tariffs, a scheme officials say costs taxpayers up to $26 billion a year in lost revenue and displaces hundreds of thousands of U.S. jobs.
The White House Office of Trade and Manufacturing Policy released the report Thursday under the title "The Great Transshipment Scam," laying out what it describes as a sprawling network of relabeling, repackaging, reinvoicing, and false country-of-origin claims designed to disguise Chinese-made goods before they reach American ports. Peter Navarro, the White House senior counsel for trade and manufacturing, told Newsmax Thursday night that the practice amounts to a modern form of smuggling.
The report draws on five independent analyses, two from government agencies, three from private firms, to estimate the scale of the problem. Those figures range from roughly $40 billion a year on the low end, per Goldman Sachs, to $303 billion in total exposure measured by Altana, a company that tracks global supply chains. The White House Council of Economic Advisers pegged illegal transshipments at approximately $60 billion annually, the Commerce Department at $67 billion, and the supply-chain intelligence firm Exiger at $75 billion using shipment-level data. The report itself cautioned that the five estimates are not additive or directly comparable.
But the downstream costs, the administration argues, dwarf even those headline numbers. Using Exiger's analysis, the White House estimated that illegal transshipment has displaced roughly 450,000 American jobs, reduced annual GDP by $113 billion to $150 billion, and drained $19 billion to $26 billion a year in federal revenue.
Navarro spoke candidly during his Newsmax appearance. He framed the scheme as a direct assault on American workers and manufacturers:
"It's modern-day smuggling. China has figured out ways to try to evade those tariffs."
The report traces the surge in transshipment to 2018, when President Trump first imposed tariffs on hundreds of billions of dollars of Chinese goods during his first term. As those tariffs took hold, the administration says, Chinese exporters began hunting for back doors, shipping goods to third countries for minor processing or simple relabeling, then exporting them to the United States under a different country-of-origin tag.
The Commerce Department found that in 2025, U.S.-bound goods were transshipped from China through Mexico, India, and Vietnam alone, resulting in an estimated $28 billion in lost tariff revenue. The report identified Canada, the European Union, Israel, Japan, Mexico, South Korea, and Taiwan as large, diversified economies where transshipment risk exists alongside substantial legitimate trade. A second tier, Brazil, Indonesia, Malaysia, Thailand, Turkey, and Vietnam, was classified as having significant integration into China-linked supply chains.
Fox News reported that the list of high-risk jurisdictions extends further, naming Panama, Colombia, and Argentina among the more than 40 countries flagged. The range of estimated transshipped goods, from $34.2 billion to $303 billion annually, reflects how difficult the problem is to measure precisely, and how wide the net of suspect trade routes has become.
The report did include a caveat: the shift in import origins away from China does not prove that all displaced trade was illegally rerouted. Some of it, the White House acknowledged, reflects legitimate changes in production, investment, and sourcing. But the administration's position is clear, a large share of that shift is fraudulent, and the cost falls squarely on American workers and the federal treasury.
The administration is not just naming the problem. It is building an enforcement apparatus around it. The centerpiece is an AI-enabled customs system called "Detective Border," designed to analyze shipment data, routing histories, product classifications, ownership relationships, and production capacity to flag suspicious cargo before it clears customs.
Navarro described the system's ambition in concrete terms:
"We can know every ship and every container coming to us from every port in the world. At the speed of the scam, we can determine how high a risk that cargo is going to be."
AP News reported that U.S. Customs and Border Protection has already launched a prototype of the AI program, with violators facing retroactive tariffs going back roughly one year. That retroactive element is designed to remove the incentive for exporters who might gamble on getting caught, the penalties would reach backward, erasing any short-term profit from the scheme.
In June, President Trump signed an executive order directing the Department of Homeland Security and Customs and Border Protection to strengthen importer requirements and demand additional ownership and business-affiliation disclosures. The order is meant to strip away the layers of shell companies and intermediaries that obscure who actually made the goods arriving at American ports.
On the trade-deal front, Navarro said U.S. Trade Representative Jamieson Greer is writing anti-transshipment provisions into every new bilateral agreement. The goal is to make partner countries accountable, if they allow their ports and factories to serve as laundromats for Chinese goods, they face consequences in their own trade relationship with Washington.
Navarro's warning to transshippers was blunt:
"If you transship, even not just by the letter of the law, but by the spirit of the law, if you try to get around that, we will bust you, we will penalize you, you will pay heavily for it."
The report itself used pointed language to describe the stakes. Just The News reported that the document stated directly: "Every dollar lost to this Great Transshipment Scam is a dollar stolen from American workers, manufacturers, and taxpayers." Navarro, who authored the report, described the underlying economics plainly: "Transshipment is driven by tariff arbitrage: When a product from one country faces a higher U.S. tariff than it would from another country, the difference becomes a profit opportunity, and even a business model in its own right."
That framing puts the problem in terms any taxpayer can understand. The tariffs exist to protect American manufacturing from artificially cheap Chinese goods. When exporters route those same goods through Vietnam or Mexico with a new label, the tariff disappears, but the damage to American factories and workers does not. The middlemen pocket the difference. The U.S. Treasury absorbs the loss.
The administration's own report acknowledged that it is too early to determine whether its tariff and anti-transshipment policies are working. Trade and customs data lag behind real-time commerce, and some enforcement provisions are still being implemented. That honesty is notable, the White House is not claiming victory, but rather building the case for why the enforcement push needs to continue and intensify.
The most politically potent figure in the report may be the estimated 450,000 American jobs displaced by illegal transshipment. That number, derived from Exiger's shipment-level analysis, represents workers in manufacturing sectors that were supposed to benefit from the tariff wall erected in 2018. If Chinese goods keep arriving under false flags, those workers never see the protection the tariffs were designed to provide.
The GDP impact is equally stark: $113 billion to $150 billion in reduced annual output. For context, that range exceeds the entire annual economic output of many mid-sized American states. And the $19 billion to $26 billion in lost federal revenue is money that either has to be made up by other taxpayers or simply adds to the deficit.
Several significant questions remain unanswered. The report does not specify what share of the shift in trade patterns it attributes to illegal transshipment versus legitimate supply-chain changes. It does not detail which of the 40-plus countries beyond those specifically named are on the list. And neither China nor any of the named transshipment-hub countries has publicly responded to the allegations, at least not in any reporting available so far.
The administration's enforcement tools, "Detective Border," the executive order, Greer's trade-deal provisions, are still taking shape. Whether they can actually choke off a smuggling network that spans four dozen countries and moves tens of billions of dollars in goods remains to be seen.
But the report does one thing clearly: it puts a price tag on the cost of looking the other way. For years, American tariff policy had a front door and 40 back doors. The administration says it intends to nail them shut. The workers whose jobs depend on it will be watching to see if the locks hold.
