A recent report from the White House has positioned India as a pivotal participant in a “shadow transhipment network” accused of facilitating the circumvention of significant US tariffs on Chinese goods. This network reportedly allows products from China, which are subject to higher tariffs when directly imported into the United States, to enter the American market by being rerouted through third countries that face lower tariff rates.
Authored by Donald Trump’s adviser, Peter Navarro, and titled “The Great Transhipment Scam,” the report estimates the value of these potentially illegal transhipments at approximately $60 billion. This practice has, according to the report, resulted in tens of billions of dollars in lost tariff revenue for the US government. The report advocates for stringent measures against nations that aid in the rerouting of tariffed goods to bypass US law, including immediate interdiction, the imposition of penalty tariffs, economic sanctions, and the potential revocation of market access.
The release of this report comes at a time of considerable strain in India-US relations. It emerged six days after the US Senate approved a bill by an overwhelming 86-11 vote, authorizing tariffs of up to 100% on countries, including India, that purchase Russian oil, gas, and other exports. Notably, the bill’s sponsors explicitly named India as one of five target economies, while excluding European allies who engage in similar purchases from Russia. The bill grants the executive branch the authority to act against China, India, Slovakia, Hungary, and Azerbaijan. Its proponents stated that the tariff rate should be sufficiently high to deter Chinese and Indian procurement of these Russian commodities. India had previously faced an additional 25% levy in August of last year, which was subsequently removed following trade negotiations. Despite these developments, India and the US have continued their efforts to finalize a trade agreement.
The White House report attributes the genesis of this “shadow transhipment network” to 2018, when the Trump administration implemented Section 301 tariffs on specific Chinese goods. These tariffs were intended to address America’s escalating trade deficit with China. Following their implementation, Chinese exporters increasingly began to route goods through other countries. Products that previously traveled directly from China to the United States were instead shipped through jurisdictions where minimal assembly, finishing, repackaging, relabeling, or documentation alterations could create the impression of a different national origin, thereby circumventing the tariffs.
The report identifies approximately 40 countries globally that play a significant role in enabling this shadow transhipment network. These countries are categorized into three tiers based on the extent of their involvement in facilitating the movement of Chinese-origin goods into the US at reduced tariff rates. India, along with other major US trading partners such as Canada, Japan, the European Union, Israel, and Mexico, has been placed in Tier 1, indicating a high level of involvement.
One assessment, utilizing data from the American Commerce Department, suggests that approximately $67 billion worth of US-bound goods were transhipped from China through primary hubs—Mexico, India, and Vietnam—in 2025. This activity is estimated to have resulted in $28 billion in lost tariff revenue.
The report further contends that the increased economic pressure on US manufacturers stemming from transhipped Chinese goods has led to severe economic repercussions for America. Based on a central estimate of $75 billion in annual illegal transhipment, the report projects approximately 450,000 displaced jobs, a reduction of $113 billion to $150 billion in annual gross domestic product, and associated federal revenue losses ranging from $19 billion to $26 billion. It is important to note that these figures are model-based estimates rather than actual observed job counts.
Finally, the report states that enabling US goods to enter the Chinese market at lower tariff rates has allowed specific corridors within India to benefit economically, often at the expense of their American counterparts. It specifically highlights the Pune–Gujarat–Chennai corridor as an area that has profited from Chinese transhipment of electric pumps and compressors, while simultaneously negatively impacting US manufacturers in cities such as Cincinnati, Dayton, and Columbus in Ohio.
