India has been placed in the highest risk category of a new White House report that accuses more than 40 countries of helping China evade United States tariffs, putting fresh strain on trade talks between New Delhi and Washington at a sensitive moment.
The report, titled “The Great Transshipment Scam,” was released on August 13 by the White House Office of Trade and Manufacturing Policy. It accuses Chinese exporters of building what it calls a “global shadow transshipment network” to route goods through third countries before they enter the United States, allowing them to disguise the true origin of products and avoid higher tariffs imposed on China since 2018.
India Classified as a Tier 1 Diversified Scale Leader
The 25 page document sorts the 40 plus named countries into three risk tiers based on the scale and nature of their alleged involvement. India has been placed in Tier 1, described in the report as “Diversified Scale Leaders,” alongside Canada, the European Union, Israel, Japan, Mexico, South Korea and Taiwan. This category covers large, diversified industrial economies where, according to the report, transshipment risks are deeply embedded within otherwise legitimate trade flows.
Tier 2, labelled “Significant Economic Integration with China,” includes Brazil, Indonesia, Malaysia, Thailand, Turkey and Vietnam. Tier 3, described as “Small, Opportunistic Targets,” includes Bangladesh, Cambodia, the Philippines, Singapore, Sri Lanka and the UAE.
The report is careful to note that this classification does not accuse the Indian government or Indian companies of deliberately committing tariff evasion. It also does not impose any new tariff on Indian exports. Transshipment on its own is not illegal under international trade rules. The report states that the practice becomes a violation only when goods do not undergo sufficient processing in the third country to legitimately qualify as originating there, yet are declared as such anyway.
The Numbers Behind the Allegations
According to the White House, illegal transshipment could be costing the United States Treasury between 19 billion and 26 billion dollars in lost tariff revenue every year. Citing a range of government and private sector estimates, the report puts the total annual value of potentially illegal transshipped goods anywhere between 40 billion and 303 billion dollars, depending on the methodology applied.
The report also claims the practice has cost the United States roughly 450,000 jobs and reduced the country’s annual gross domestic product by 113 billion to 150 billion dollars. A separate analysis cited from the Commerce Department found that close to 67 billion dollars worth of goods were transshipped from China through Mexico, India and Vietnam during 2025 alone, resulting in an estimated 28 billion dollars in lost tariff revenue across the three countries combined.
The report singles out India’s Pune-Gujarat-Chennai industrial corridor as a case in point, alleging that the belt has benefited from the inflow of Chinese electric pumps and compressors that are later exported to the United States, allegedly at the expense of American manufacturers based in Ohio cities such as Cincinnati and Dayton. Some processing units involved in this kind of activity are referred to in the report as “screwdriver factories,” a term used to describe facilities accused of carrying out only minimal assembly work before relabelling goods for export.
What Peter Navarro Said
White House trade adviser Peter Navarro, who has championed the report, was the most prominent official to comment publicly on its findings. Speaking to reporters on a briefing call after the report’s release, he said,
“For years the great transshipment scam has let communist China launder its exports to more than 40 countries, rob our treasury of tens of billions of dollars and steal the paychecks of American workers.”
Navarro also issued a direct warning aimed at the countries named in the report, stating,
“Our warning to the lower tariff countries facilitating and enabling the transshipping is this, preferential access to the American market is not a license to launder somebody else’s exports.”
He went further and named India specifically during the same briefing, telling reporters,
“This is about the 40 plus countries that are enabling the transshipping, and as we impose higher tariffs on other countries, India, Vietnam, down the line, they’re going to try this transhipment too.”
Navarro added that the administration’s broader message to trading partners was about fair practice rather than punishment, saying,
“The way to pay less is not to cheat, it is to stop dumping, respect intellectual property, drop your barriers to American goods and move towards reciprocity.”
Indian Trade Experts Push Back on the Evidence
The report has drawn sharp scrutiny from Indian trade policy circles. Ajay Srivastava, founder of the Global Trade Research Initiative and a former Indian Trade Service officer, questioned the strength of the data underpinning the 67 billion dollar transshipment estimate. He noted that the figure covers three countries collectively without offering a country specific breakdown, saying,
Srivastava pointed out that the report does not isolate India’s individual share of that figure, leaving the scale of the country’s alleged involvement unclear. Trade researchers have also argued that a rise in exports from a country like India does not, by itself, prove that Chinese goods are being deliberately rerouted through its ports. Genuine shifts in production, investment and global sourcing patterns can produce similar trade data without any element of evasion, a caveat the White House report itself acknowledges elsewhere in its text.
New Enforcement Measures on the Way
Alongside the report, the White House outlined a set of enforcement measures aimed at tightening customs scrutiny at American ports of entry. These include an executive order intended to expand the powers of United States Customs and Border Protection, and a new artificial intelligence based screening system, reportedly named Detective Border, designed to flag suspicious shipments before they arrive.
According to officials, the system will cross check a shipment’s declared country of origin against its shipping route, component sourcing, factory production capacity, container markings and X-ray scan data to identify inconsistencies. Navarro confirmed that importers found to have falsified a product’s country of origin could face tariffs applied retroactively, covering shipments dating back approximately one year. Officials also said anti-transshipment clauses are expected to be written into future American trade agreements, including any prospective deal currently being negotiated with India.
Timing Adds Pressure to India-US Trade Talks
The report’s release comes at a delicate point in India-US trade relations, with both countries working toward an interim reciprocal trade agreement. India’s Commerce Secretary, Rajesh Agarwal, has said that New Delhi remains in regular contact with Washington on trade matters as negotiations continue.
The Tier 1 classification, while stopping short of any concrete penalty, is likely to add a layer of scrutiny to Indian shipments bound for the United States, particularly in sectors flagged in the report such as electric pumps, compressors and related industrial goods. With artificial intelligence based customs screening and the possibility of retroactive tariffs now on the table, exporters in the corridors named in the report may face closer inspection of their supply chains in the months ahead as both governments continue talks on a broader trade agreement.
