White House’s Tariff Evasion Report: What It Claims, What’s Disputed

On August 13, 2026, the White House Office of Trade and Manufacturing Policy released a 25-page report called “The Great Transshipment Scam.” It argues that more than 40 countries are helping Chinese exporters dodge U.S. tariffs by routing goods through third countries before they reach American shores, and it puts a price tag on that practice: tens of billions of dollars a year in lost tariff revenue.

This isn’t a routine government data release like a jobs report or a GDP estimate. It’s a policy paper written by the same office that designed the tariff program it’s defending, timed just weeks before a planned September visit to Washington by Chinese President Xi Jinping. That context matters for how to read the numbers inside it. Below, we walk through what the report actually says, where its own figures pull in different directions, and how economists across the political spectrum are reacting. Assistance from Claude AI.

The White House. “The Great Transshipment Scam.” The White House, 13 Aug. 2026, https://www.whitehouse.gov/releases/2026/08/the-great-transshipment-scam/.

Headline Numbers: What the Report Claims

Unlike a monthly jobs or inflation report, there’s no “consensus forecast” for a policy paper like this one — so there’s nothing to beat or miss. Instead, the report’s own headline number is itself a range, assembled from five independent estimates that don’t agree with each other:

• Annual illegal transshipment flow: $40 billion to $303 billion, a 7.5-fold spread depending on which of five methodologies you use (Goldman Sachs, the White House Council of Economic Advisers, Exiger, the Commerce Department, and Altana). The report settles on Exiger’s $75 billion as its working “central case.”
• Annual tariff revenue lost: roughly $19 billion to $26 billion at the central case, though the report’s own table shows a range from about $10 billion (narrowest scenario) to more than $130 billion (broadest scenario) depending on which flow estimate and tariff-gap assumption you use.
• More than 40 countries named as posing “elevated transshipment risk,” including major trading partners like Canada, Mexico, the European Union, Japan, South Korea, and India, alongside smaller economies like Cambodia, Panama, and the UAE.
• CBP enforcement activity, comparing the 526 days before and after the current administration’s inauguration: shipments flagged for post-release discrepancies rose 245% (from 93,744 to 323,677), and associated revenue assessments rose 169% (from $9.6 billion to $25.8 billion).
• Broader economic impact (central case): roughly 450,000 jobs displaced, $113 billion to $150 billion in reduced annual GDP, and $19 billion to $26 billion in separate federal revenue losses tied to that smaller GDP — a figure the report arrives at through economic modeling, not direct measurement.

That last point is worth sitting with for a second, because it’s genuinely confusing on first read: the report cites “$19 billion to $26 billion” twice, for two different things. One is unpaid tariff duties. The other is broader federal tax revenue lost because a smaller economy generates less tax revenue overall. They land in a similar dollar range mostly by coincidence of the assumptions used, not because they’re measuring the same loss twice.

What This Actually Means

“Transshipment” is a customs term for routing goods through a third country before they reach their final destination. It isn’t automatically illegal — companies build factories in Vietnam or Mexico all the time for entirely legitimate reasons. It becomes illegal when the third-country stop is mostly paperwork: relabeling a box, swapping an invoice, or doing a token bit of assembly, specifically to make a product look like it wasn’t made in a higher-tariff country when it substantially still was.

The story the report tells goes back to 2018, when the first Trump administration imposed tariffs on about $370 billion of Chinese goods under Section 301 of U.S. trade law. Those tariffs worked, in the narrow sense that direct imports from China fell. But according to the report, Chinese exporters and their trading partners adapted by routing goods through countries with lower U.S. tariffs — a pattern the report calls the “Great Reallocation.” As tariffs have gotten more differentiated across countries in 2025 and 2026, the report argues the incentive to route around them has grown too: the bigger the gap between what a country’s own goods pay and what China’s goods pay, the more profitable it becomes to make Chinese goods look like they came from somewhere else.

For a general reader, the plain-English version is this: a tariff is only as effective as a country’s ability to verify where a product actually came from. When tariff rates vary widely by country, there’s real money in making that verification hard.

Key Internals and Nuance

A few things a first read of the report’s press coverage will miss:

Legal tax avoidance and illegal tax evasion are different things, and the report blends them. Building a real factory in Vietnam that performs genuine manufacturing is legal, even if it’s done partly to avoid Chinese-origin tariffs — that’s ordinary “substantial transformation” under customs law. Relabeling a finished Chinese product in a Vietnamese warehouse and shipping it on is not. The report’s own data (the rising import share of “transshipment-risk” countries) can’t distinguish between the two, and the report acknowledges this directly: it states that the correlation between China’s falling import share and other countries’ rising share “does not establish that all displaced Chinese trade was illegally transshipped.” Some of it is legitimate supply-chain relocation — companies genuinely diversifying production away from China, a trend sometimes called “China+1” that predates and is separate from any fraud.

The five estimates aren’t measuring the same thing, and aren’t additive. Goldman Sachs’s $40 billion figure isolates only the narrow rerouting channel using 2023 data. Altana’s $303 billion figure uses a much broader facility-level exposure measure that likely counts legitimate transformation and ordinary logistics routing alongside actual fraud. The report itself cautions that these five figures are not additive and not directly comparable — a caveat that’s easy to lose in a headline citing “$303 billion.”

The CBP enforcement numbers measure activity, not necessarily crime. A 245% jump in flagged shipments could mean transshipment fraud increased, or it could mean CBP is looking harder and using new AI tools to look — the report doesn’t have a way to separate those two explanations, and it doesn’t fully try to.

Duty rates can stack in ways the headline numbers don’t fully capture. Separate from the general tariff differentials, the U.S. maintains more than 200 active antidumping and countervailing duty orders on Chinese-origin products — some combining for effective rates well above 100%, and in a few product categories (quartz surfaces, for instance) into the hundreds of percent. The report’s illustrative 25-45% tariff-gap assumptions likely understate the incentive to evade duties in those specific product lines.

This is an advocacy document, not neutral data. The report was written by Peter Navarro’s Office of Trade and Manufacturing Policy — the same office that designed the tariff structure it’s now arguing needs stronger enforcement. That doesn’t make its facts wrong, but it means the report is making a case for a policy conclusion (more enforcement funding, the “Detective Border” AI system, tighter customs rules) rather than presenting disinterested measurement, and it should be read with the same scrutiny any advocacy document gets.

Trend Context: The “Great Reallocation” Since 2018

The report’s most interesting chart tracks two lines since China joined the World Trade Organization in 2001: China’s direct share of U.S. goods imports, and the combined import share of the 40-plus countries the report flags as elevated transshipment risk. China’s share rose steadily after 2001, peaked around the 2018 tariff imposition, and has declined since. The flagged countries’ combined share has risen over roughly the same period — a mirror-image pattern the report calls “unlikely to be explained by chance alone.”

That’s a real, documented trade pattern — U.S. Census data confirms China’s import share has fallen since 2018 while imports from Vietnam, Mexico, and other Southeast Asian and Latin American economies have risen. Where the report’s interpretation gets more contested is in how much of that shift represents fraud versus legitimate business decisions by global manufacturers responding rationally to a decade of tariff pressure. Both forces are almost certainly present; the report doesn’t offer a way to cleanly separate them, and neither, at this point, does anyone else.

What Economists and Analysts Are Saying

Reactions broke down largely along existing fault lines in the tariff debate, with one unusual wrinkle: even some tariff skeptics agreed the underlying enforcement problem is real, while disagreeing sharply about what it proves.

Administration officials framed it as validation. Treasury Secretary Scott Bessent said the report shows the administration is pairing strong trade policy with stronger enforcement, so that goods entering the country pay the duties they legally owe. Navarro told reporters the practice has let China launder its exports through dozens of countries for years, calling it “the oldest trick in the book.”

Free-trade-oriented economists argued the report proves the opposite of what it intends. Cato Institute vice president Scott Lincicome quipped online that high, unevenly applied tariffs are exactly what standard trade theory predicts will encourage evasion — “great job, officer,” he wrote, suggesting the report mostly documents the predictable side effect of the administration’s own tariff design. UC San Diego economics professor Kyle Handley made a more technical point: he distinguished legal substantial transformation (real manufacturing in a place like Vietnam) from illegal relabeling, and argued that much of the reallocation the report treats as suspicious simply wouldn’t happen if the U.S. still applied uniform tariff rates across trading partners rather than the current country-by-country patchwork.

Some financial-sector analysts, cited within the report itself, cautioned the transshipment channel captures only part of the picture — separate practices like undervaluing shipments or misclassifying goods into lower-duty categories may account for additional, uncounted revenue loss that isn’t reflected in any of the five headline estimates.

The named countries have mostly stayed quiet so far. China’s embassy in Washington offered a measured response, saying any unilateral actions on transshipment shouldn’t target or harm third-party interests — notable restraint given the sharp language (“scam,” “laundering”) used throughout the report, and likely shaped by the upcoming Xi Jinping visit.

Policy Implications

For the Federal Reserve: the report has no direct bearing on interest rate decisions, but it’s a reminder that tariff policy remains a live source of price and trade uncertainty the Fed has to model around — relevant background as the FOMC, under Chair Kevin Warsh, continues to hold rates at 3.50%-3.75% with a hawkish posture partly shaped by tariff-related cost pressure.

For Congress: the report explicitly calls for legislative action to codify country-of-origin rules, which it describes as currently based on inconsistent case law rather than clear statute. It also frames lost tariff revenue in stark budgetary terms — comparing a $25 billion annual loss to the entire CBP budget, and a $100 billion loss to two-thirds of the Department of Transportation’s budget — an argument likely to surface in upcoming appropriations and trade-enforcement funding debates.

For the executive branch: the report previews continued use of Executive Order 14411 (tightening importer bonding, ownership disclosure, and penalties) and a new AI system CBP is calling the “Detective Border,” designed to flag suspicious shipping and ownership patterns before goods clear customs. The administration is also building anti-transshipment provisions into its bilateral “Agreements on Reciprocal Trade,” meaning this report is likely a preview of tougher rule-of-origin demands in future trade negotiations — including, potentially, talks around the planned Trump-Xi meeting in September.

What to Watch Next

• The Trump-Xi meeting in September 2026 — this report reads in part as a negotiating position ahead of that visit, and China’s response to specific transshipment allegations may shape how talks unfold.
• Implementation of Executive Order 14411 — several of its provisions (importer bonding, ownership disclosure requirements) aren’t fully in effect yet; how aggressively they’re enforced will be the real test of whether this report changes anything.
• Future trade data from Census and USITC DataWeb — the report itself concedes it’s “too early to determine the net effect” of the administration’s anti-transshipment measures, since customs data arrives with a lag. Whether the “40-plus country” import share keeps climbing or starts to flatten will be the clearest real-world signal to watch.

Bottom Line

The White House says tariff dodging through third countries costs the U.S. somewhere between $19 billion and $26 billion a year in lost revenue, built from a central estimate of $75 billion in rerouted goods — though the report’s own underlying estimates range as wide as $40 billion to $303 billion depending on methodology. The core trend it describes, China’s import share falling as other countries’ share rises since 2018, is real and well documented; how much of that reflects illegal fraud versus ordinary businesses relocating production is the genuinely unsettled question, and the report — written by the same office that built the tariff structure in question — doesn’t fully settle it either.