Trump Targets Tariff Evasion, With Eye On China
Goods deemed to be "transshipped," or sent through a third country with lower export levies, will face an additional 40-percent duty under an incoming wave of Trump tariffs Thursday.
The latest tranche of "reciprocal" tariff hikes, taking aim at what Washington deems unfair trade practices, impacts dozens of economies from Taiwan to India.
The transshipment rule does not name countries, but is expected to impact China significantly given its position as a manufacturing powerhouse.
Washington likely wants to develop supply chains that are less reliant on China, analysts say, as tensions simmer between the world's two biggest economies and the US sounds the alarm on Beijing's excess industrial capacity.
But "it's a little more about the short-term effect of strengthening the tariff regime than it is about a decoupling strategy," said Josh Lipsky, chair of international economics at the Atlantic Council.
"The point is to make countries worried about it and then have them err on the side of not doing it, because they know that Trump could then jack up the tariff rates higher again," he added, referring to tariff evasion.
The possibility of a sharply higher duty is a "perpetual stick in the negotiations" with countries, said Richard Stern, a tax and budget expert at the conservative Heritage Foundation.
He told AFP that expanding penalties across the globe takes the focus away from Beijing alone.
Experts have noted that Vietnam was the biggest winner from supply chain diversions from China since the first Trump tariffs around 2018, when Washington and Beijing engaged in a trade war.
And Brookings Institution senior fellow Robin Brooks pointed to signs this year of significant transshipments of Chinese goods.
He noted in a June report that Chinese exports to certain Southeast Asian countries started surging "anomalously" in early 2025 as Trump threatened widespread levies.
While it is unclear if all these products end up in the United States, Brooks cast doubt on the likelihood that domestic demand in countries like Thailand and Vietnam rocketed right when Trump imposed duties.
"One purpose of the transshipment provisions is to force the development of supply chains that exclude Chinese inputs," said William Reinsch, senior adviser at the Center for Strategic and International Studies.
"The other purpose is to push back on Chinese overcapacity and force them to eat their own surpluses," he added.
But Washington's success in the latter goal depends on its ability to get other countries on board.
"The transshipment penalties are designed to encourage that," Reinsch said.
Lipsky added: "The strategy that worked in the first Trump term, to try to offshore some Chinese manufacturing to other countries like Vietnam and Mexico, is going to be a much more difficult strategy to execute now."
Lipsky noted that Beijing could see the transshipment clause as one targeting China on trade, "because it is."
"The question is, how China takes that in the broader context of what had been a thawing relationship between the US and China over the past two months," he added.
While both countries temporarily lowered triple-digit tariffs on each other's exports, that truce expires August 12.
The countries are in talks to potentially extend the de-escalation, although the final decision lies with Trump.
It will be tough to draw a line defining product origins, analysts say.
Customs fraud has been illegal for some time, but it remains unclear how Washington will view materials from China or elsewhere that have been significantly transformed.
The burden lies with customs authorities to identify transshipment and assess the increased duties.
"That will be difficult, particularly in countries that have close relations with China and no particular incentive to help US Customs and Border Protection," Reinsch added. Analysts have noted signs of transshipment of Chinese goods this year AFP
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Int'l Business Times
8 minutes ago
- Int'l Business Times
China Says Trade Jumped In July, Beating Forecasts
China's exports beat expectations and rose 7.2 percent year-on-year in July, official data showed Thursday, as overseas shipments buoyed its struggling economy even as it navigated a shaky trade war truce with the United States. The two economic superpowers agreed in Stockholm last month to hold further talks on extending the tariff truce. That deal has temporarily set fresh US duties on Chinese goods at 30 percent, while Beijing's levies on US goods stand at 10 percent. The accord -- initially agreed in Geneva in May -- brought down triple-digit tariffs each side had imposed on the other after Donald Trump launched his "Liberation Day" levies on April 2. The 90-day truce is set to end on August 12, when the original duties could snap back. US Trade Representative Jamieson Greer said following the Stockholm talks that Trump would have the "final say" on any extension of a tariffs truce between Washington and Beijing. Higher tariffs on dozens of trading partners -- including a blistering 35 percent on Canada -- came into force Thursday as Trump seeks to reshape global trade to benefit the US economy. He has also threatened to impose 100 percent tariffs on semiconductor imports. Thursday's data showing an increase in China's overseas shipments last month outpaced a Bloomberg forecast of 5.6 percent. But the figures also showed that China's exports to the United States, its largest trading partner, continued to fall, sinking 6.1 percent from the previous month. And imports -- a key gauge of struggling domestic demand -- jumped 4.1 percent year-on-year in July, compared with a Bloomberg forecast of a one-percent fall. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said the data showed "exports supported the economy strongly so far this year". "Export growth may slow in coming months, as the front loading of exports due to US tariffs fades away," he said. "The big question is how much China's exports will slow and how it would spill over to the rest of the economy," he said. Beijing has said an official goal of around five percent growth this year. But it has struggled to maintain a strong economic recovery from the pandemic, as it fights a debt crisis in its massive property sector, chronically low consumption and elevated youth unemployment. Factory output shrank more than expected in July, data showed last week.
Int'l Business Times
38 minutes ago
- Int'l Business Times
Higher US Tariffs Take Effect On Dozens Of Economies
Higher US tariffs came into effect for dozens of economies Thursday, drastically raising the stakes in President Donald Trump's wide-ranging efforts to reshape global trade. As an executive order signed last week by Trump took effect, US duties rose from 10 percent to levels between 15 percent and 41 percent for a list of trading partners. Many products from economies like the European Union, Japan and South Korea now face a 15-percent tariff, even with deals struck with Washington to avert steeper threatened levies. But others like India face a 25-percent duty -- to be doubled in three weeks -- while Syria, Myanmar and Laos face staggering levels at either 40 percent or 41 percent. The latest tariff wave of "reciprocal" duties, aimed at addressing trade practices Washington deems unfair, broadens the measures Trump has imposed since returning to the presidency. But these higher tariffs do not apply to sector-specific imports that are separately targeted, such as steel, autos, pharmaceuticals and chips. Trump said Wednesday he planned a 100-percent tariff on semiconductors -- though Taipei said chipmaking giant TSMC would be exempt as it has US factories. Even so, companies and industry groups warn that the new levies will severely hurt smaller American businesses. Economists caution that they could fuel inflation and weigh on growth in the longer haul. While some experts argue that the effects on prices will be one-off, others believe the jury is still out. With the dust settling on countries' tariff levels, at least for now, Georgetown University professor Marc Busch expects US businesses to pass along more of the bill to consumers. An earlier 90-day pause in these higher "reciprocal" tariffs gave importers time to stock up, he said. But although the wait-and-see strategy led businesses to absorb more of the tariff burden initially, inventories are depleting and it is unlikely they will do this indefinitely, he told AFP. "With back-to-school shopping just weeks away, this will matter politically," said Busch, an international trade policy expert. The tariff order taking effect Thursday also leaves lingering questions for partners that have negotiated deals with Trump recently. Tokyo and Washington, for example, appear at odds over key details of their tariffs pact, such as when lower levies on Japanese cars will take place. Washington has yet to provide a date for reduced auto tariffs to take effect for Japan, the EU and South Korea. Generally, US auto imports now face a 25-percent duty under a sector-specific order. A White House official told AFP that Japan's 15-percent tariff stacks atop of existing duties, despite Tokyo's expectations of some concessions. Meanwhile, the EU continues to seek a carveout from tariffs for its key wine industry. In a recent industry letter addressed to Trump, the US Wine Trade Alliance and others urged the sector's exclusion from tariffs, saying: "Wine sales account for up to 60 percent of gross margins of full-service restaurants." Trump is also not letting up in his trade wars. He opened a new front Wednesday by doubling planned duties on Indian goods to 50 percent, citing New Delhi's continued purchase of Russian oil. But the additional 25-percent duty would take effect in three weeks. Trump's order for added India duties also threatened penalties on other countries that "directly or indirectly" import Russian oil, a key revenue source for Moscow's war in Ukraine. Existing exemptions still apply, with pharmaceuticals and smartphones excluded for now. And Trump has separately targeted Brazil over the trial of his right-wing ally, former president Jair Bolsonaro, who is accused of planning a coup. US tariffs on various Brazilian goods surged from 10 percent to 50 percent Wednesday, but broad exemptions including for orange juice and civil aircraft are seen as softening the blow. Still, key products like Brazilian coffee, beef and sugar are hit. Many of Trump's sweeping tariffs face legal challenges over his use of emergency economic powers, with the cases likely to ultimately reach the US Supreme Court. An order by President Donald Trump, raising tariffs on dozens of trading partners, took effect Thursday AFP US companies and industry groups warn that President Donald Trump's new tariffs could severely hurt smaller American businesses AFP
Int'l Business Times
38 minutes ago
- Int'l Business Times
Pacific Microstate Sells First Passports To Fund Climate Action
A remote Pacific nation has started selling passports to fund climate action, but is so far struggling to attract new citizens to the low-lying, largely barren island. Pacific microstate Nauru, one of the world's smallest nations, has a novel plan to fund its fight against climate change by selling so-called "golden passports". Selling for US$105,000 each, Nauru plans to drum up more than US$5 million in the first year of the "climate resilience citizenship" programme. Almost six months after the scheme opened in February, Nauru has so far approved just six applications -- covering two families and four individuals. Despite the slow start -- Nauru eventually hopes to sell 66 passports in the scheme's first year -- President David Adeang remained upbeat. "We welcome our new citizens whose investment will assist Nauru to secure a sustainable and prosperous future for generations to come," he told AFP on Thursday. Nauru believes the passport programme could eventually generate $43 million -- or about 500 successful applicants -- which would account for almost 20 percent of total government revenue. But there are fears the scheme could be ripe for exploitation. Edward Clark, who runs Nauru's climate passport programme, said one application has already been withdrawn after officials flagged "adverse findings" during background checks. "The application would have been rejected had it not been withdrawn," he told AFP. A previous Nauru attempt to sell passports ended in disaster. In 2003, Nauru officials sold citizenship to Al-Qaeda members who were later arrested in Asia. Among the first batch of climate passports approved was an unnamed German family of four living in Dubai, said Clark touting the "major milestone". "They were looking for a second citizenship to provide them with a Plan B given the current global political volatility." The Nauru passport provides visa-free entry into 89 countries, including the United Kingdom, Ireland, United Arab Emirates and Hong Kong. More than 60 different nations offer some form of migration for investment schemes, Australia's Lowy Institute has found. Pacific nations such as Vanuatu, Samoa and Tonga have all dabbled in selling passports. The island republic of Nauru sits on a small plateau of phosphate rock in the sparsely populated South Pacific. With a total landmass of just 21 square kilometres (eight square miles), it is one of the world's smallest nations. Unusually pure phosphate deposits -- a key ingredient in fertiliser -- once made Nauru one of the wealthiest places, per capita, on the planet. But these supplies have long dried up, and researchers today estimate 80 percent of Nauru has been rendered uninhabitable by mining. What little land Nauru has left is threatened by encroaching tides. Scientists have measured sea levels rising 1.5 times faster than global averages. Nauru will eventually need to relocate 90 percent of its population as creeping seas start to eat away at its coastal fringe. The first phase of this mass relocation is estimated to cost more than $60 million.
