This comes at a time when the U.S. has already imposed a 10% tariff on India for not doing enough to stop the import of goods made using forced labour. File photo
| Photo Credit: AP
India is once again in the U.S.’ crosshairs, this time for allegedly allowing China to evade U.S. tariffs by routing its exports through the country. The latest allegations are part of a new White House report called ‘The Great Transhipment Scam’.
In particular, the U.S. has named the Pune-Gujarat-Chennai belt as one of the areas “enabling” China to evade tariffs to the detriment of supply chains in the U.S.
This comes at a time when the U.S. has already imposed a 10% tariff on India for not doing enough to stop the import of goods made using forced labour, and is in the process of enacting legislation that would see tariffs of up to 100% imposed on India for its import of Russian oil.
An ongoing investigation by the U.S. Trade Representative (USTR) related to excess capacity could see further tariffs on top of all this.
‘Enabling’ China to evade tariffs
The U.S. had in 2018 levied tariffs ranging from 7.5% to 100% on goods from China under Section 301 of the Trade Act of 1974 for unfair trade and tech practices. On July 24, 2026, it added a further 12.5% tariff for forced-labour compliance gaps.
“After their imposition, Chinese exporters increasingly routed goods through third countries,” the White House report noted. “Products that previously moved directly from China to the United States were shipped through jurisdictions where limited assembly, finishing, repackaging, relabeling, or documentation changes could create the appearance of a different national origin.”
The report has identified more than 40 countries associated with “elevated illegal transshipment risk”, with India among the top “enablers” of China’s evasion of tariffs.
India among top enablers
“The countries that comprise China’s Shadow Transshipment Network include many of America’s largest trading partners,” the report said. “China’s biggest enablers range from Mexico and Canada on U.S. land borders to the European Union, India, Japan, and South Korea.”
The report classifies the 40-odd countries into three tiers based on how big a transgressor the U.S. feels they are.
The top tier comprises “countries and trading blocs that account for large absolute volumes of China-linked goods while maintaining diversified industrial bases and major U.S.-bound export platforms”.
The report added that in these economies, illegal transshipment risk is embedded within broad legitimate trade flows. This Tier 1 includes Canada, the European Union, India, Israel, Japan, Mexico, South Korea, and Taiwan.
“India’s Pune-Gujarat-Chennai production belt absorbs pumps and compressors… affecting industrial supply chains in Cincinnati, Dayton, and Columbus,” the report added.
How the scam supposedly works
The report goes on to explain that tariff arbitrage lies at the heart of this transshipment arrangement. When a Chinese product that faces a high U.S. tariff is routed through a country with a lower tariff rate, that difference simultaneously becomes a loss of revenue for the U.S. government and a profit for the exporter.
“Such tariff arbitrage creates the financial engine behind the Great Transshipment Scam,” the report added. “The savings are more than sufficient to finance the capital equipment, logistics infrastructure, light assembly plants, repackaging operations, and ‘screwdriver factories’ needed to support the scam across Southeast Asia, Mexico, India, and Eastern Europe.”
It added that such assembly factories are designed for tariff evasion, and tariff avoidance rather than true manufacturing.
“The Office of Trade and Economic Analysis (OTEA) estimates that approximately $67 billion in U.S.-bound goods were transshipped from China through the top hubs — Mexico, India, and Vietnam — in 2025, producing an estimated $28 billion in lost tariff revenue,” the report said.
Published – August 14, 2026 12:11 pm IST
