Report estimates $19 billion to $26 billion in tariff losses, saying allies including Canada and the EU are enablers
By Stu Woo
SINGAPORE -- Take a nearly finished shirt in China, ship it to Cambodia, put a few stitches in it and call it Cambodian.
The White House says this is how Chinese exporters are dodging American tariffs meant to protect U.S. manufacturing.
As Washington prepares for a visit from Chinese leader Xi Jinping next month, a new report led by White House trade adviser Peter Navarro said more than 40 other countries that face lower tariffs enable the evasion. They include China's Asian neighbors, including Vietnam and Malaysia, but also major trading partners such as Canada, Mexico and the European Union.
The report said illegal transshipment hurt American manufacturers and cost the U.S. an estimated $19 billion to $26 billion in annual tariff revenue.
To stop this practice, the report suggested measures including artificial-intelligence tools at the border to scan cargo and documents, and tightening standards that define a product's country of origin.
President Trump and Xi pledged to stabilize relations during a May summit in Beijing, but the two countries have continued exchanging tit-for-tat trade measures. On Thursday, Trump announced tariffs on drones designed to counter China's dominance in the commercial drone market.
U.S. officials have been concerned about illegal transshipment since the first Trump administration, which sought to reduce Chinese imports by imposing high tariffs on some Chinese goods. Then last year, Trump levied fresh tariffs on products from China and most of its other trading partners.
The effective tariff rate on Chinese goods was about 23% in June, according to the Penn Wharton Budget Model -- more than triple that of other major trading partners. The goal was to level the playing field against China's state-supported companies and revitalize American manufacturing.
The White House report didn't include new evidence on the scale of transshipment into the U.S. economy, instead citing estimates from third parties, which ranged from $40 billion to $303 billion.
The administration's uneven tariff rates increased incentives for shipping Chinese goods to the U.S. via other markets, said Deborah Elms, head of trade policy at the Hinrich Foundation, which promotes global commerce. She likened the current U.S. tariff policy to putting a $10 toll on the highway and a $3 toll on other roads.
"This is a problem that you created, and now you are complaining that the countries are taking advantage of the problem that you created," Elms said.
The report said it was too early to determine whether the new tariffs and other policies have had an effect on the illegal transshipment of Chinese goods into the U.S.