Trump’s Transshipment Crackdown Explained

The Trump administration is tightening its grip on transshipment to stop Chinese manufacturers from sidestepping U.S. tariffs by routing goods through third countries. In this article, we break down the new U.S. strategy and why it's raising alarms about rising costs, compliance burdens, and supply chain complexity for American businesses.

The Transshipment Loophole

Earlier this year, President Donald Trump introduced a 10% tariff on all imports to the U.S., alongside “reciprocal tariffs” on over 200 countries, including major trading partners such as China, Japan, and the European Union. But the uneven tariff rates left room for exploitation: manufacturers began rerouting goods through lower-tariff nations, a practice known as transshipment.

China-based exporters increasingly funnelled products through countries like Vietnam and Malaysia to bypass higher tariff thresholds. According to The Washington Post and Reuters, this gave rise to a new logistics sub-industry: firms specialising in “origin-masking” services, including relabeling shipments as locally made. While technically legal in some cases, the scale of this workaround drew scrutiny and cast doubt on the effectiveness of U.S. tariff policy.

The Response

To clamp down, the U.S. has struck new trade deals with nations such as Vietnam and Indonesia. These agreements introduce a two-tiered tariff system: lower rates (around 20% for Vietnam, 19% for Indonesia) for genuinely local goods, and higher rates (up to 40%) for products with significant Chinese content.

President Trump extended the tariff implementation deadline to August 1, giving partner countries more time to negotiate. However, the White House has confirmed that new rates will take effect if no agreements are reached by then.

The Concerns

While aimed at strengthening domestic manufacturing, the crackdown is raising fresh concerns among supply chain experts. The new rules are expected to increase costs, introduce complex documentation requirements, and disrupt cross-border flows, particularly in sectors like electronics and automotive, which rely on global, cost-efficient sourcing. A macro-level analysis by the Federal Reserve Bank of Richmond indicates that each 10% tariff generally raises producer prices by around 1%, contributing to higher consumer prices and inflationary pressure.

As a result, economists predict a further decline in U.S. manufacturing output (a trend already observed since the introduction of “reciprocal tariffs”), alongside rising inflation and longer delivery times, as businesses attempt to offset disruptions by holding higher inventory levels. The uncertainty is also rippling into adjacent industries: logistics providers and warehouse automation vendors report stalled investment decisions as companies wait for clearer policy guidance.

The Future

Rather than streamlining trade, the transshipment crackdown may be making it more complex. While the intent is to prevent China from sidestepping U.S. tariffs and to promote local production, the practical outcome for many importers and exporters could be longer lead times, higher costs, and additional compliance headaches, especially if enforcement guidelines remain vague or if deadlines continue to shift.

Feeling uncertain? You’re not alone. The KATA Global Logistics team is here to help – whether you trade with the U.S. or not. Every day, we support clients navigating ocean, air, rail, and road freight, as well as dealing with customs, tax compliance, and ever-changing regulations. We stay ahead so you can stay focused.

Contact KATA today for professional advice!