Deceive the heavens to cross the sea — an ancient Chinese proverb now applied to trade. In a bid to dodge US tariffs, the White House says Chinese exporters are relabeling goods abroad, costing up to $26B a year in lost revenue. More than 40 nations enable it, including Canada, Mexico, Vietnam, Malaysia, and the EU.
- For example, take a near-finished shirt sewn in China, ship it to Cambodia for a few stitches — and it re-emerges tariff-free as “Made in Cambodia.”
- To catch it, US Customs is deploying AI to scan containers, packaging, and X-ray images — while proposing tighter country-of-origin standards.
Self-inflicted wounds: Trade policy experts say Washington built this loophole itself. China’s effective tariff rate hit ~23% in June, more than triple the rate other major trading partners face, per Penn Wharton estimates. The report ranks India among China’s top enablers too, with India, Mexico, and Vietnam accounting for ~$67B in transshipped goods last year alone. That gap lands as Washington preps for a planned September visit from President Xi Jinping, with India trade talks already underway. So much for stabilizing relations.
