The United States has placed India among more than 40 countries that Washington says form part of what it calls a “shadow transhipment network” used to reroute Chinese goods and potentially avoid higher American tariffs. The allegation appears in a new White House report titled The Great Transshipment Scam, prepared under the direction of US trade and manufacturing adviser Peter Navarro.
According to the report, Chinese products that face high tariffs when shipped directly from China to the United States have increasingly been routed through third countries. In some cases, the report alleges, goods may undergo limited assembly, finishing, packaging, relabelling or documentation changes before being exported to the American market. Such practices can make products appear to have a different country of origin.
The White House traces the growth of this system to 2018, when the first Trump administration imposed Section 301 tariffs on a large range of Chinese products. The report argues that Chinese exporters responded by seeking alternative routes into the US market rather than absorbing the full cost of the tariffs.
India has been placed in the report’s Tier 1 category, alongside several major trading partners of the United States, including Mexico, Canada, Japan, South Korea and the European Union. The report says Tier 1 countries represent large-scale trading and industrial platforms where China-linked goods may be integrated into legitimate supply chains while also presenting transhipment risks.
The report estimates that potentially illegal transhipment could be worth around $60 billion annually. Another estimate cited in the report puts the value of US-bound goods transhipped from China through major hubs, including Mexico, India and Vietnam, at approximately $67 billion in 2025. It estimates that this could have resulted in around $28 billion in lost US tariff revenue.
Washington argues that the issue is not simply about customs paperwork. The White House says tariff evasion can undermine American manufacturers because imported products that avoid the intended duties may compete with domestically produced goods at lower prices.
The report specifically highlights electric pumps and compressors allegedly moving through an India-based corridor linking Pune, Gujarat and Chennai. According to the report, these movements illustrate how Chinese-linked products could enter broader supply chains before being exported onward.
However, the allegations require careful interpretation. The report discusses a global network involving dozens of countries, and being listed does not automatically mean that the government of a named country knowingly participated in illegal activity. India is a major manufacturing and trading economy with legitimate commercial links to both China and the United States.
The latest US report nevertheless creates another sensitive issue for India-US trade relations. The two countries have been attempting to strengthen commercial ties while negotiating trade arrangements.
Washington now says it intends to use stronger customs enforcement and artificial intelligence to identify suspicious trade routes. The White House has proposed an AI-enabled system called “Detective Border” that would examine shipping routes, declared origins, production capacity and other trade information.
For India, the development could mean greater scrutiny of exporters, supply chains and origin documentation. It also places additional importance on demonstrating genuine domestic value addition when Indian-made products enter the US market.
The central question now is whether Washington’s allegations will lead to investigations, penalties or additional trade restrictions, or whether they will primarily serve as a warning to exporters and intermediary countries.