US Accuses India and Other Nations of Aiding Chinese Tariff Evasion

The United States government has named India alongside roughly 40 other jurisdictions in an official report alleging that partner countries are assisting China in circumventing American import duties. Published by the White House under the title ‘The Great Transhipment Scam’, the document outlines how foreign trade routes are reportedly leveraged to bypass measures enacted to protect domestic American industries.

What Happened

According to the White House report, Chinese exporters have increasingly routed merchandise through third-party nations since 2018 to skirt punitive tariffs. That year, the US applied tariffs ranging between 7.5% and 100% on Chinese goods such as semiconductors, electric vehicles, and medical items under Section 301 of the Trade Act of 1974. On July 24, 2026, Washington imposed an additional 12.5% tariff citing gaps in forced-labour compliance and lack of comprehensive legal import bans.

The report claims that goods originating from China undergo minimal assembly, finishing, repackaging, relabelling, or minor paperwork alterations in intermediary countries to alter their apparent place of origin. The US has identified Mexico, Canada, the European Union, Japan, South Korea, and India as primary enablers of this practice. An analysis by the Office of Trade and Economic Analysis estimated that in 2025, approximately $67 billion worth of goods bound for the US were transhipped from China through the top hubs—namely Mexico, India, and Vietnam—causing roughly $28 billion in lost tariff revenue.

In one specific instance highlighted in the publication, the Pune-Gujarat-Chennai industrial corridor in India was described as absorbing Chinese-made pumps and compressors, an arrangement the White House contends has disrupted industrial supply chains in US cities such as Cincinnati, Dayton, and Columbus.

Key Highlights

• The White House released ‘The Great Transhipment Scam’ report, naming over 40 jurisdictions as elevated illegal transhipment risks.
• India, Mexico, and Vietnam were identified as the primary hubs responsible for an estimated $67 billion in transhipped Chinese goods in 2025.
• US overall imports rose from $2.41 trillion in 2017 to $3.50 trillion in 2025, even as direct imports from China dropped from $525.8 billion to $327.5 billion over the same period.
• India already faces several US trade measures, including a 50% penalty duty related to imports of Russian oil and a 10% tariff linked to forced-labour compliance standards.
• The US Senate has passed legislation backed by President Donald Trump proposing tariffs of up to 100% on India over Russian oil purchases, which now awaits action in the House of Representatives.

Why This Matters

The findings indicate that while tariffs curtailed direct shipments from China, they largely caused American companies to substitute imports from other nations rather than increase domestic manufacturing. Global Trade Research Initiative founder Ajay Srivastava noted that the tariffs altered import sources without diminishing overall American reliance on foreign goods.

For India, the allegations pose potential economic hurdles. Rather than importing finished consumer products, India’s industrial sector has progressively imported raw materials and intermediate inputs from China to support domestic assembly. For instance, electronic components grew from 3.3% of India’s imports from China in the first quarter of 2015-16 to nearly 13% by the first quarter of 2026-27, while imports of finished telecom instruments and consumer electronics declined significantly. If trade friction leads to US penalties or restricts input sourcing, manufacturing costs across Indian export sectors could escalate.

What to Watch Next

While the White House has not yet announced direct retaliatory penalties linked specifically to the transhipment report, President Donald Trump could potentially levy additional tariffs on nations deemed to be facilitating Chinese evasion. Observers will also track the progression of the Senate-cleared bill in the US House of Representatives concerning Russian oil purchases, alongside the conclusions of an ongoing US investigation into excess capacity.

Frequently Asked Questions

What is the ‘Great Transhipment Scam’ referenced by the White House?

It refers to a White House report alleging that Chinese manufacturers route products through third countries to alter labels or perform minor modifications, thereby avoiding higher direct US import tariffs.

Which Indian regions were cited in the US report?

The report specifically referenced the Pune-Gujarat-Chennai manufacturing belt, stating that it absorbs Chinese compressors and pumps, which affects manufacturing supply chains in parts of the United States.

Has the US imposed new duties on India following these allegations?

No new penalties were announced alongside the report, though the US has previously levied penalties over Russian oil imports and labour compliance, with further legislative and administrative tariff proposals still pending.

Source: The Hindu