US Transshipment Claims on India’s $87B Exports Challenged by Trade Data

A recent White House report placing India in its highest-risk tier for alleged Chinese tariff circumvention has brought scrutiny to the country’s $87.31 billion export trade with the United States in FY26. However, an analysis of trade statistics by the Global Trade Research Initiative (GTRI) indicates that India’s broad export portfolio and domestic manufacturing processes present a much more complex reality than simple cargo rerouting.

What Happened

On August 13, the White House released a report titled The Great Transshipment Scam: Rise, Scope, and Costs, which placed India among more than 40 nations accused of facilitating the rerouting of Chinese goods to avoid US tariffs. The report cited an estimated $67 billion of goods allegedly transshipped through Mexico, India, and Vietnam in 2025, generating an estimated $28 billion in lost US tariff revenues.

In response, GTRI questioned the evidentiary foundation of the allegations, noting that the US document does not break down India’s specific share of the $67 billion figure, identify any specific Indian exporters, or point to concrete fraudulent shipments.

Key Highlights

• Total Trade Volumes: India exported $87.31 billion worth of goods to the US in FY26 compared to $86.51 billion in FY25, while importing $131.62 billion from China in FY26, up from $113.45 billion the previous year.
• Broad US Export Basket: India’s key exports to the US in FY26 included electrical machinery ($25.68 billion, up 61.5 percent), pharmaceuticals ($8.67 billion), iron and steel articles ($3.02 billion), vehicles and parts ($2.47 billion), and knitted apparel ($2.36 billion).
• Deep Chinese Input Links: Major imports from China in FY26 included electrical machinery ($46.37 billion), mechanical appliances ($29.45 billion), organic chemicals ($11.52 billion), and plastics ($6.71 billion), showing reliance on Chinese components for domestic manufacturing.
• Pumps and Compressors Case Study: The White House report highlighted India’s Pune-Gujarat-Chennai corridor for pumps and compressors. In FY26, India exported $1.61 billion in liquid pumps globally ($414.5 million to the US) and imported $326.4 million from China. For air pumps and gas compressors, global exports stood at $1.48 billion ($335.4 million to the US) against $1.63 billion in imports from China.
• Broader Trade Shifts: US imports from China declined from $525.8 billion in 2017 to $327.5 billion in 2025, while total overall US imports climbed from $2.41 trillion to $3.50 trillion over the same period.

Why This Matters

The distinction between fraudulent rerouting and legitimate manufacturing is critical. An Indian firm can import components from China, perform substantial processing or transformation in India, and export the finished good to the US under applicable rules of origin. Aggregate trade data demonstrates that Chinese intermediate goods are integrated into Indian supply chains, but it cannot alone determine the value added in India or prove that goods were simply relabelled or reinvoiced.

What to Watch Next

GTRI has recommended that Indian authorities seek shipment-level evidence behind the US claims and review the specific product categories listed by Washington. This step is intended to distinguish legitimate manufacturing using imported Chinese components from unlawful transshipment while protecting compliant exporters from unverified trade actions.

Frequently Asked Questions

What is the basis of the US transshipment claims against India?

The White House report asserts that Chinese manufacturers circumvent tariffs by routing shipments through third countries via relabelling, repackaging, and minimal processing, estimating $67 billion in transshipped goods across India, Mexico, and Vietnam in 2025.

Why does GTRI dispute the conclusions drawn from trade data?

GTRI founder Ajay Srivastava pointed out that trade data correlations do not constitute proof of transshipment. The US report did not provide India-specific totals, name non-compliant entities, or cite specific fraudulent consignments.

Which Indian export categories are largest in the US trade?

In FY26, electrical machinery and equipment formed the largest category at $25.68 billion, followed by pharmaceuticals at $8.67 billion and iron and steel articles at $3.02 billion.

Source: Moneycontrol