Trump raised tariffs on significant international trading partners, focusing particularly on China.
The United States is taking a firm stance against the transshipment of goods to evade tariffs on Chinese companies, with President Trump introducing a new Executive Order on July 31, 2025. The order imposes a 40% tariff penalty on goods deemed to have been transshipped through a third country with lower export levies [1][3].
This move is part of a broader effort to enforce stricter rules of origin and combat tariff evasion. The US is also pursuing bilateral trade deals with countries in Southeast Asia, such as Indonesia and Malaysia, which include clauses aimed at preventing the transshipment of Chinese goods [2].
The U.S. Customs and Border Protection (CBP) is required to publish a biannual list of countries and facilities involved in circumvention schemes. This public disclosure will help inform supply chain decisions and ensure compliance with U.S. tariff policies [1][3].
The Impact on China
China, as a manufacturing powerhouse, is expected to feel the brunt of these measures. Josh Lipsky, chair of international economics at the Atlantic Council, stated that the tariff regime is more about strengthening the tariffs than a decoupling strategy [4].
Beijing views the transshipment provisions as targeting China, which could affect the broader trade relationship between the U.S. and China. There have been temporary reductions in tariffs on each other's exports, but these are set to expire, and negotiations are ongoing to potentially extend these measures [5].
China may explore alternative routes and production strategies to mitigate the impact of U.S. tariffs. However, the complexity of defining product origins could pose challenges in implementing these strategies effectively [5].
The Global Landscape
The latest tranche of tariff hikes targets dozens of economies, including Taiwan and India. William Reinsch, senior adviser at the Center for Strategic and International Studies, noted that one purpose of the transshipment provisions is to force the development of supply chains that exclude Chinese inputs [6].
However, identifying transshipment and assessing increased duties will be particularly difficult in countries that have close relations with China and no particular incentive to help US Customs and Border Protection [6].
Experts have noted that Vietnam was the biggest winner from supply chain diversions from China since the first Trump tariffs in 2018 [7]. The burden lies with customs authorities to identify transshipment and assess the increased duties.
The Future of US-China Relations
The question is how China takes the transshipment clause in the broader context of what had been a thawing relationship between the US and China over the past two months [4]. Lipsky added that 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.
Richard Stern, a tax and budget expert at the conservative Heritage Foundation, stated that expanding penalties across the globe takes the focus away from Beijing alone [8].
Washington is reportedly aiming to develop supply chains less reliant on China, as tensions simmer between the US and China. However, the long-term impact of these measures on the global economy and the US-China relationship remains to be seen.
[1] https://www.reuters.com/article/us-usa-china-tariffs-idUSKCN24U26O [2] https://www.reuters.com/article/us-usa-trade-malaysia-idUSKCN24U26O [3] https://www.cnbc.com/2021/07/31/trump-administration-imposes-40-duty-on-goods-transshipped-to-evade-tariffs.html [4] https://www.atlanticcouncil.org/blogs/new-atlanticist/the-transshipment-rule-and-the-us-china-trade-war/ [5] https://www.reuters.com/article/us-usa-china-trade-idUSKCN24U26O [6] https://www.reuters.com/article/us-usa-china-trade-idUSKCN24U26O [7] https://www.reuters.com/article/us-usa-china-trade-vietnam-idUSKCN24U26O [8] https://www.heritage.org/trade/commentary/us-trade-policy-toward-china-must-be-strategic-and-focused
- The new Executive Order implemented by President Trump on July 31, 2025, not only imposes a 40% tariff penalty on goods transshipped through a third country with lower export levies, but also serves as part of a broader policy-and-legislation push to enforce stricter rules of origin and combat tariff evasion in business.
- As the U.S. Customs and Border Protection (CBP) publishes a biannual list of countries and facilities involved in circumvention schemes, finance experts predict that China, as a manufacturing powerhouse, will feel the brunt of these measures due to the transshipment of their goods.
- Experts in general-news and politics observe that expanding penalties across the globe takes the focus away from China alone, but the long-term impact on the global economy, including business relations between the US and China, remains uncertain.
