Trump targets tariff evasion, with eye on China
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. – AFP
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Kuwait Times
8 hours ago
- Kuwait Times
Organizers prepare for Winter Games
ROME: Six months before the start of the Winter Olympics, Italian organizers say that, after years of ups and downs, they are on schedule. 'Preparations are progressing steadily and according to the timeline we have set,' Andrea Varnier, the chief executive officer of Milan-Cortina 2026 Olympic and Paralympic Organizing Committee, told AFP. The Olympic opening ceremony is on February 6, though curling kicks off the action two days earlier. The Paralympics open a month later on March 6, though curling again breaks the ice two days beforehand. 'We are currently in the core phase of operational implementation,' said Varnier. Simico, the public company responsible for delivering the Olympic facilities, last week promised that 'all the planned sports construction projects will be completed before the start of the Olympics'. Organizers have made a point of delivering a low-cost Winter games after recent extravangances. Sochi, in Russia in 2014, cost at least $40 billion (34.5 bn euros at current exchange rates). Pyeongchang, in South Korea in 2018, came in at over $12 bn. The COVID-hit Games in Beijing in 2022 officially cost $4 bn, but financial analysts said that including infrastructure costs put the total at around $38bn. Milan-Cortina estimate their final bill will be 5.2 bn euros ($6 bn). Of that 3.5 bn euros is going on infrastructure and 1.7 bn euros on staging the Games. The Games are using a host of existing venues - emphasizing the point by holding the closing ceremony in the almost 2,000-year-old Roman amphitheatre in Verona. Organizers say that avoiding new construction reduces not only costs but environmental impact. 'Complex global event' This approach also means the Games will stretch across northern Italy from Cortina in the Dolomites in the east 350 kilometers to the western suburbs of Milan, with other 'clusters' spread through the Alps. 'As with any complex global event, challenges are part of the process,' said Varnier. 'We are moving forward with confidence.' One of the few new venues will be briefly the Milano Santa Giulia Ice Hockey Arena before assuming its intended role as the multi-purpose Eventim Arena after the Games. While organizers have managed to avoid being lumbered with a little-used speed-skating track by temporarily converting two exhibition halls at the Milan fair grounds, another group of sports with few participants created a political and construction headache. Because Italy did not have a track for the bobsleigh, luge, and skeleton events, organizers considered using existing sites in Austria or Switzerland. Matteo Salvini, the second-in-command and Minister of Transport in Giorgia Meloni's hard-right government, insisted in late 2023 that the events be held in Italy. That meant a breakneck race to build a track in Cortina. It was completed just in time for pre-approval in March. Accommodation, which often poses a logistical and financial problem for Olympic organizers, seems to be locked up. The Milan Village, six seven-storey buildings to be converted into university dorms after the Games, will be delivered in 'early October' despite the recent legal troubles of its developer, the Coima group. In Cortina, 377 prefabricated modules will be installed by the end of October. 'We'll be ready' While it is not clear if Italy's ski star Federica Brignone, who won the overall World Cup and a world title last season but smashed her left leg, will be fit to compete, the organizers revealed in July the design of the medals she would be chasing. They will weigh 420 grams in bronze and 500 grams in gold and in silver. The designer promised the medals will endure better than a few of those from last year's Paris Games. Some 220 medals, which contained a small piece of scrap metal from the Eiffel Tower, had to be replaced because they quickly turned black or rusted. 'We cannot allow what happened in Paris to happen again,' said their designer Raffaella Panie. That leaves just one unknown. The Italian meteorological service, contacted by AFP, said it was unable to predict whether there would be enough snow next February. The organizers said they were not worried. 'We'll be ready,' they said. — AFP
Kuwait Times
8 hours ago
- Kuwait Times
German firms bet on know-how to beat Trump tariffs
FRANKFURT: While Germany's big companies groan under the US tariff burden, many small and midsize firms, the backbone of Europe's top economy, are confident their highly-specialized goods will just keep selling. The hope is that, in niche areas where American customers have no obvious alternatives, buyers across the Atlantic will just have to accept paying higher prices for their high-tech machines and products. 'The customer in America pays the tariff,' said Thorsten Bauer, co-head of laser maker Xiton Photonics, based in the western city of Kaiserslautern. 'We don't notice a thing.' Bauer's firm of about 20 workers is in this respect typical of the often family-owned enterprises that make up the German 'Mittelstand', Deutsche Bank executive Jan-Philipp Gillmann said. 'German Mittelstand companies are somewhat protected since they are often very specialized, sometimes the only firm that makes a particular part,' said Gillmann, Deutsche Bank's Head of Corporate Bank Europe. 'The cost of the tariff will often be borne by the consumer.' Under a framework deal agreed in late July, EU exports are set to face across-the-board US tariffs of 15 percent from Thursday—higher than traditional duties but much lower than Trump's threatened 30 percent. While German corporate titans such as automaker Volkswagen have grabbed headlines by taking tariff hits measured in the billions, many of the smaller firms hope to weather the headwinds. Brian Fuerderer, head and founder of Microqore Medical, a high-end surgical equipment maker with 32 employees, agreed. 'It's not possible to just copy 'Made in Germany,'' he said. 'There's not much comparable to what we in Germany do when it comes to medical technology.' He added that US tariffs would have to rise to 30 or even 40 percent before American customers got cold feet. 'For Volkswagen, for big business, it's hard,' he said. 'But if you have a real niche, something only certain specialists can do, demand will carry on as before.' The Mittelstand's rugged optimism defies Trump's repeated statements that foreign companies—not American importers or consumers—will pay the tariffs. That does not mean the levies—and the past months of uncertainty around them—have left the small and medium enterprises entirely unscathed. The United States is Germany's largest trading partner and Trump's on-again, off-again tariff blitz has already had an impact. 'When all the tariffs started, I made no US sales for three months,' Bauer said. 'You don't spend money if you don't know how things will look in the next six months.' He hopes the latest agreement fixing duties at 15 percent, up from a provisional 10 percent in the lead-up to an August 1 deadline, will at least give American companies the confidence to place orders again. But he is not entirely sure, pointing to Trump's highly changeable tariff policies. 'There's no legal certainty, basically,' Bauer said. 'I am trying to push up sales in Europe with discounts and things like that, to be less dependent on the international market.' About a quarter of Xiton Photonic's sales are exports to the United States and it would be hard to diversify, Bauer said, since his high-tech customers are more often found in Japan, China or America than in Europe. Wider geopolitical tensions mean there is no easy answer. 'China could equally turn around tomorrow and say: 'We are not importing anything from the EU,'' said Bauer. 'In that case I'd be just another leaf blown about by the wind.' Fuerderer, whose company makes half its sales in the United States, said that relocating production there could make sense for some firms in the sector over the long term, particularly given high energy costs and burdensome bureaucracy at home. 'The US government wants companies to manufacture in the United States and they have tax breaks, grants and subsidies to make it happen,' he said. In Europe, by contrast, Fuerderer said 'we are regulating ourselves to death. People are afraid to put money on the table and try something new.' — AFP
Kuwait Times
8 hours ago
- Kuwait Times
Trump targets tariff evasion, with eye on China
WASHINGTON: As the United States ramps up tariffs on major trading partners globally, President Donald Trump is also disrupting strategies that could be used—by Chinese companies or others—to circumvent them. 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. – AFP
