Beijing rejects Washington's 'tariff evasion' accusations

China has rebuffed accusations of a so-called "transshipment scam" made by the United States, with experts and officials emphasizing that normal shifts in global supply chains when companies diversify production and sourcing networks should not be smeared as "tariff evasion".

Their remarks come after a report released earlier this week by the White House's Office of Trade and Manufacturing Policy accused more than 40 economies and trading groups of facilitating "Chinese tariff evasion".

The report, titled "The Great Transshipment Scam", claimed that goods once shipped directly from China to the US were now increasingly routed through other jurisdictions, where minor processing — such as limited assembly, finishing, repackaging, relabeling or paperwork changes — could make them appear to have originated elsewhere.

Huo Jianguo, former head of the Chinese Academy of International Trade and Economic Cooperation, noted that transshipment is a common practice in international trade, as goods may need to pass through third countries for storage, processing, assembly or reexport. The key question, he said, is whether companies falsely declare the place of origin or violate the rules of origin.

Trade flows cannot be interpreted simply by looking at changes in bilateral statistics. A decline in direct Chinese exports to the US and a rise in such exports to Mexico, Canada or Southeast Asia do not automatically mean that Chinese-made goods are being rerouted.

Shi Xiaoli, a professor of international economic law at China University of Political Science and Law in Beijing, said global supply chains are constantly evolving, with companies building factories overseas, sourcing local components and carrying out substantial processing in third countries. Such changes can legitimately result in products gaining third-country origin status, she pointed out.

"Assessments of 'tariff evasion' should rely on verifiable transaction-level evidence, such as specific shipments, companies and origin documents, rather than broad estimates (on which the US report relies) based mainly on changes in trade patterns," Shi added.

In response to the US' latest accusations, a Chinese embassy spokesperson in Washington, DC, said on Thursday that any unilateral actions on transshipped goods must not target any third parties' interests, emphasizing that tariff and trade wars produce no winners, as protectionism harms the common interests of all countries and fails to make the nations that impose them more competitive.

China firmly opposes unilateral tariff measures and the over-stretching of national security justifications to suppress Chinese enterprises, and it rejects any effort to strike a deal at its expense or to use coercive economic measures that disrupt global industrial and supply chains, the spokesperson said.

Should such situations arise, China will take necessary steps to safeguard its own interests, the spokesperson warned.

Jiang Wenran, founding director of the China Institute at the University of Alberta in Canada, said the White House report blames other countries for a problem created by tariffs imposed by the administration of US President Donald Trump, which have already been ruled as illegal by the Supreme Court.

He called the report's headline $75 billion estimate a model-derived figure, rather than a verified loss, noting that the report itself concedes its five estimates aren't comparable to each other.

Underlying the dispute is research from the Peterson Institute for International Economics, a think tank based in Washington, DC. It shows that US tariffs on China have not fully reduced US dependence on Chinese suppliers, as the supply chain has simply shifted through other countries and many shipped goods still include Chinese components.

The Peterson Institute research, which was released on Aug 4, examined value-added trade flows through 2024, and it found that US reliance on Chinese producers was much more than what bilateral trade data suggested.

Tariffs have been a central US trade policy tool since 2018, starting with steel and aluminum levies and duties on Chinese goods over "unfair trade practices", prompting retaliation from China and other trading partners. Former US president Joe Biden kept many tariffs in place, and more have been added under Trump's second term.

Steve Lamar, president and CEO of the American Apparel & Footwear Association, said importers are confused by rates that appear to legalize, while heavily taxing, activity that was previously prohibited.

Supply chain experts emphasized that globally interconnected manufacturing can make true origin genuinely hard to determine.

Drone imports

In a related development on Thursday, the US government imposed up to 100 percent tariffs on imported drones and their key components, including those from China, citing national security concerns.

By contrast, imports from the European Union, Japan, South Korea, Switzerland and Liechtenstein will generally face a 15 percent tariff, which is sharply below the maximum levy applied to "sensitive drones" from other countries and regions.

Wang Peng, a researcher at the Beijing Academy of Social Sciences, said the US is caught between its misguided national security concerns and its high dependence on Chinese imports.

"If dependence on Chinese drones constitutes a 'national security threat', then cutting off that supply when the US has no alternative is an even greater security threat," Wang added.

Yang Gao contributed to this story.

Zhong Nan and Cheng Yu in Beijing, BELINDA ROBINSON in New York and MAY ZHOU in Houston