A $67 bn tariff trail leads the US to India over China trade. Where's the proof?

India has come under heightened US scrutiny over alleged Chinese tariff evasion, with Washington estimating that $67 billion worth of goods were transshipped through India, Mexico and Vietnam in 2025. However, the White House report does not disclose India's share of the figure or identify any Indian exporter or shipment involved in tariff fraud, according to the Global Trade Research Initiative (GTRI).

The White House on August 13 released a report titled The Great Transshipment Scam: Rise, Scope, and Costs, accusing exporters of routing goods through more than 40 countries to evade US tariffs. It said such practices can involve relabelling, repackaging, re-invoicing, minor processing or false country-of-origin claims before goods enter the US.

Also Read:India in 'regular contact' with US on trade deal, says Commerce Secretary Rajesh Agarwal


India has been placed in the report's Tier 1 category of countries with elevated transshipment risk, alongside Canada, the European Union, Israel, Japan, Mexico, South Korea and Taiwan.

GTRI founder Ajay Srivastava said aggregate trade data do not establish that rising exports from countries such as India represent widespread rerouting of Chinese goods.

“The report cites a US Commerce estimate that $67 billion of goods were transshipped through India, Mexico and Vietnam in 2025, causing $28 billion in tariff losses,” the think tank said.

Also Read: India’s FTA exports surge, shipments to Singapore and Sri Lanka more than double

GTRI said the report does not provide a country-wise breakdown of that figure, leaving India's alleged share unclear. It also does not identify an Indian exporter or cite a specific Indian shipment that was found to have evaded US tariffs.

India-specific transshipment concerns

The White House report specifically flags the Pune-Gujarat-Chennai manufacturing corridor in connection with pumps and compressors under HS codes 8413 and 8414.

GTRI said India's established manufacturing and export base in these product categories weakens any presumption that Indian shipments to the US are simply Chinese goods being rerouted.

In FY2026, India exported liquid pumps worth $1.61 billion globally, including $414.5 million to the US, while imports from China stood at $326.4 million, according to GTRI.

India also exported air pumps and gas compressors worth $1.48 billion globally, including $335.4 million to the US, while imports from China were $1.63 billion.

The trade body said the scale of India's exports in these categories demonstrates that the country has genuine manufacturing capabilities and that Chinese imports alone cannot establish illegal transshipment.

Chinese inputs do not automatically make a product Chinese

A central issue raised by GTRI is the distinction between legitimate participation in global supply chains and customs fraud.

China has increasingly supplied components and intermediate goods to manufacturers in countries including India, Mexico and Vietnam. Those inputs can then be processed, assembled or incorporated into finished products before being exported to the US.

Where that processing results in substantial transformation, GTRI said, the resulting product is legitimately an export of the manufacturing country.

“Goods substantially processed in India, Mexico or Vietnam are genuine exports of those countries—not automatically Chinese transshipment,” GTRI said.

The organisation also argued that the White House report risks stretching the technical meaning of transshipment by grouping activities such as assembly, testing, finishing and component integration with practices such as relabelling, repackaging and re-invoicing.

According to GTRI, this could blur the distinction between legitimate manufacturing and deliberate origin fraud.

Tariffs shifted US sourcing, not import dependence

GTRI also questioned whether the decline in direct US imports from China demonstrates that Trump's tariff policy has reduced America's overall dependence on foreign goods.

US imports from China fell from $525.8 billion in 2017 to $327.5 billion in 2025. However, total US imports rose from $2.41 trillion to $3.50 trillion over the same period.

The organisation said this indicates that tariffs have changed the source of US imports rather than substantially reducing America's reliance on imported goods.

China, meanwhile, has adapted by supplying more intermediate goods to manufacturers participating in global value chains, GTRI said.

Trade data from Mexico, Vietnam and India also show why an increase in exports to the US alongside higher imports from China cannot, by itself, prove illegal rerouting.

Between 2017 and 2024, Mexico's exports to the US increased by $194.2 billion, while its imports from China rose by $54.3 billion.

Vietnam's exports to the US increased by $94.1 billion against a $90.2 billion increase in imports from China.

India's exports to the US rose by $40.7 billion, while its imports from China increased by $52.4 billion.

GTRI said Chinese imports into India may be used for domestic consumption, genuine manufacturing or exports to markets other than the US.

“Aggregate trade data do not prove that rising US imports from third countries represent rerouted Chinese goods,” GTRI said.

GTRI flags four weaknesses in US case

GTRI identified four broad weaknesses in the White House's approach.

First, it said the report risks expanding the definition of transshipment beyond the traditional movement of unchanged cargo to include legitimate manufacturing activities such as assembly, testing and finishing.

Second, it said trade correlations cannot establish origin fraud. A fall in direct Chinese exports to the US alongside an increase in exports from another country does not prove that the same goods were relabelled and routed through that country.

Third, GTRI argued that country-specific US tariffs have created large tariff differences that increase incentives for companies to attempt evasion.

Fourth, it pointed to the US's existing non-preferential rules of origin, which use the principle of substantial transformation, and warned that tougher statutory standards could increase uncertainty and compliance costs for legitimate manufacturers using imported inputs.

Indian exporters could face greater scrutiny

The White House report proposes stronger enforcement against suspected transshipment and says the US is developing new tools to identify high-risk shipments.

The administration has also highlighted an AI-enabled system called “Detective Border”, which is intended to analyse trade data and identify inconsistencies involving declared origins, routing histories and component content.

US officials have said the broader crackdown is intended to prevent tariff evasion and recover revenue lost through illegal transshipment.

For Indian exporters, however, tougher enforcement could mean more inspections, shipment delays, retrospective duties and penalties, GTRI said.

The issue could be particularly significant for Indian manufacturers that use Chinese components or intermediate goods but carry out substantial processing and value addition in India.

GTRI calls for shipment-level evidence

GTRI said India should seek detailed evidence from Washington on the allegations, including the country-, product- and shipment-level basis for the $67 billion estimate.

It also recommended that Indian authorities examine the products specifically identified by the White House by matching firm-level Chinese imports with US-bound exports and verifying domestic value addition.

Such an exercise would help identify genuine cases of tariff evasion while protecting legitimate Indian exporters from unsupported action, GTRI said.

For India, the immediate challenge is therefore twofold: determine whether any exporters are actually misusing rules of origin while ensuring that manufacturers participating legitimately in global supply chains are not caught in a broader US crackdown.

The White House has argued that illegal transshipment undermines US tariffs and deprives the Treasury of revenue. GTRI, meanwhile, has maintained that the evidence needs to move beyond broad trade patterns and establish the specific shipments and transactions involved before legitimate Indian exports are treated as part of a tariff-evasion network.