Uncovering Beijing's Tariff Evasion Strategies
In the ongoing trade tensions between the United States and China, Chinese manufacturers have developed sophisticated methods to bypass US tariffs. According to a shipping expert cited in recent reports, 'Chinese manufacturers didn't just sit back and accept the cost' of tariffs. Instead, they have adopted strategies such as transshipment, where goods are routed through third countries like Vietnam, Thailand, or Mexico to obscure their origin before entering the US market.
Another tactic involves breaking down shipments into smaller packages valued under $800, which often qualify for tariff exemptions under US de minimis rules. This method, sometimes referred to as the 'Tijuana two-step,' allows bulk goods to be repackaged or minimally processed in intermediary countries, making them appear as if they originated elsewhere. Social media platforms in China have also been reported to advertise services for 'place-of-origin washing,' further facilitating these evasion efforts.
US Response and New Trade Policies
The United States has not remained passive in the face of these evasion tactics. President Donald Trump has recently taken significant steps to address transshipment loopholes. A tentative trade agreement with Vietnam, for instance, sets tariffs on Vietnamese goods at 20%, but imposes a hefty 40% tax on Chinese goods rerouted through Vietnam to circumvent US measures. This policy aims to deter companies from using Vietnam as a conduit for tariff evasion.
Additionally, the Trump administration has escalated tariffs on Chinese imports, with recent increases pushing rates as high as 125% on certain goods. This comes in response to China's retaliatory tariffs, which have risen to 84% on US products as of April 10. These measures reflect a broader strategy to 'rewire the global economy,' as described in recent updates, focusing on closing loopholes exploited by Chinese exporters.
The Commerce Secretary has emphasized that these tariffs are not arbitrary but are specifically designed to target evasion practices. The administration has also quietly reached out to Beijing for tariff talks ahead of key deadlines, signaling an intent to address these issues through both enforcement and dialogue, though no concrete resolutions have been announced.
Impact on Global Trade Dynamics
The ripple effects of these tariff evasion strategies and countermeasures are reshaping global trade corridors. Spikes in exports from intermediary countries like Thailand and Mexico, which do not align with their local production capacities, have raised alarms among US customs officials. These new trade routes are creating challenges for enforcement, as relabeling and minimal processing obscure the true origins of goods.
American importers are also implicated in these practices, often adjusting contract terms to maintain pre-tariff costs by allowing suppliers to control shipments. This dynamic complicates accountability, as US law does not require foreign entities to adhere to certain regulatory standards, further enabling evasion. As tensions persist, the ongoing trade war continues to drive uncertainty in markets, with both nations vowing to stand firm in their respective positions.