Generated by Codex with GPT 5.6 Sol XHigh

America’s tariff campaign against China has produced exactly the kind of supply-chain shifts its critics predicted. The Trump administration now treats that outcome as evidence of a vast foreign conspiracy. In a White House paper called “The Great Transshipment Scam”, trade adviser Peter Navarro accuses dozens of countries of helping Chinese goods dodge American tariffs. The article argues that this diagnosis confuses genuine customs fraud with the ordinary restructuring of global supply chains.

A problem made in Washington

When Donald Trump first raised tariffs on Chinese goods in 2018, the gap between the levies imposed on China and those imposed on the rest of the world was just 0.9 percentage points. By 2025 it had widened to 29 points. That gap gave firms a strong incentive to move manufacturing, assembly and sourcing into countries such as Vietnam, Malaysia and Mexico.

The result was a sharp change in the origin of American imports. China’s share fell from 21% to 9%, while shipments from other countries rose. Those “connector” economies also imported more from China, often using Chinese components in goods that were then assembled locally and sold to America. Navarro presents this pattern as proof of deception. The article sees it as the predictable response to a tariff system that penalizes one country far more heavily than others.

Fraud is not the same as production

Some firms undoubtedly conceal a product’s origin by relabeling it or routing it through another country. America is entitled to punish such customs fraud. But trade law also recognizes “substantial transformation”: when materials are turned into a genuinely different product, the finished good may legally acquire a new country of origin.

The boundary is complicated. Free-trade agreements therefore contain detailed rules of origin for thousands of products, negotiated line by line. Navarro cites estimates suggesting that illegal transshipment could be worth as much as \$303bn a year. Yet even a more credible Goldman Sachs estimate of \$40bn in superficially re-exported Chinese goods does not claim that all those flows are unlawful. By contrast, an American enforcement task force says it has recovered \$1bn from actual tariff evasion.

Navarro’s objection goes much further than illegality. His paper treats Chinese inputs, financing, ownership, suppliers, production steps and even routing histories as signs of a shadow network. It labels 43 countries, accounting for more than 70% of America’s non-Chinese imports, as participants. But assembly hubs, ports, bonded warehouses and logistics centers are not the hidden machinery of a scam. They are the visible infrastructure of modern trade.

The cost of treating trade as a conspiracy

If Washington truly wants to exclude Chinese content, it could set a clear threshold and tax or ban goods above it. That would at least be coherent. It would also expose the policy’s cost: Chinese components are embedded throughout global manufacturing, so sweeping restrictions would raise prices for American consumers already angry about the cost of living.

The administration has instead left “transshipment” vague enough to cover almost any international supply chain, while threatening 40% tariffs and proposing an AI-enabled border surveillance system. The central lesson is that the confusion is not an accidental flaw. Once trade is organized around large, discriminatory tariff gaps, businesses will reorganize to reduce their exposure. Calling that adaptation a scam does not repair the policy. It merely turns the architecture of global commerce into the next target.