A new United States report has identified India among more than 40 countries as one of 40 nations that are exposed to a global “shadow transshipment network” involving China-related goods. The new study has attracted attention to China-related goods which are in demand by some of them as one of the major hubs through which goods from China may be moved to the US market before a Chinese import in the US, potentially allowing exporters to avoid the higher tariffs on Chinese products from China.
The report does not accuse the Indian government of deliberately helping China escape US tariffs. Rather, it points out that legitimate trade routes, manufacturing centres and logistics networks in countries such as India can also be used for transshipment. The difference is that the report focuses on the vulnerability of global supply chains rather than the claim that every country mentioned in the report is knowingly engaging in tariff fraud.
Described as “The Great Transshipment Scam” in the report, it shows how Chinese-related products can be transported through third countries before going to the United States. That trend increased after the US imposed heavy tariffs on Chinese goods during President Donald Trump’s first administration starting in 2018.
The report says that Chinese exporters adapt to the changing tariff environment by expanding to countries where goods might face lower tariffs before coming to the American market. In some cases, products may be handled with limited processing, repackaging, relabelling or documentation changes in another country. This may make it appear the merchandise came from that country rather than China.
The report describes the phenomenon in particularly strong terms, calling it “smuggling disguised as trade” and portraying it as fraud concealed behind trade documentation. But it also notes that the entire international trading system has legitimate manufacturing and re-export activity and it is difficult to distinguish ordinary global commerce from deliberate tariff evasion.
India is in the top tier of the report along with Canada, the European Union, Israel, Japan, Mexico, South Korea and Taiwan. These countries are called “Diversified Scale Leaders” because they have high trade volumes, manufacturing capacity and are export destinations. Their entry into the list reflects both their global supply chain significance and the potential scale of transshipment through their markets.
One of the report’s most significant estimates comes from analysis by the US Commerce Department’s Office of Trade and Economic Analysis. Based on transaction-level customs data, it estimates that about $67 billion of US-bound goods were transferred from China through Mexico, India and Vietnam in 2025.
The report estimates that these shipments may have resulted in about $28 billion in lost US tariff revenue. It is also worth saying that the result is based on a narrower methodology and is linked to the tight transaction matching and should not be taken as the total amount of tariff evasion through the global network.
India’s entry is significant because India has become an increasingly important manufacturing and export hub. As companies diversify their supply chains beyond China (and there are many more companies that do this), India has been attracting investment and is growing its role in international production. This growth can create legitimate economic opportunities, but at the same time it also means the authorities have to prove where goods are coming from and how they were made.
The report claims that the wider network covers more than 40 lower-tariff jurisdictions. It says China-linked goods can move through manufacturing centres, logistics hubs, free-trade zones and re-export platforms before eventually reaching American consumers.
Washington is now considering using more artificial intelligence to look for suspicious trade patterns. An “AI-enabled Detective Border” was outlined in the report to look at shipping routes, declared country of origin, components, production capacity and other trade data.
The aim is to identify situations in which the documentation surrounding a shipment appears inconsistent with the physical product or the manufacturing capacity of the country listed as its origin. Advanced data analysis could help authorities identify unusual routing patterns and possibly fraudulent origin declarations more quickly.
For India, the report could put more pressure on exports to the United States in sectors where Chinese inputs or components are significant. Indian exporters and manufacturers could be more under pressure to keep detailed documentation of the origin and transformation of their products.
The report’s findings are thus a warning about trade vulnerabilities, not a full indictment of India. Being among those countries on the network does not in itself mean that Indian authorities or businesses took part in tariff evasion.
As Washington continues to try and enforce tariffs and protect customs revenue, countries that are major manufacturing and trading hubs are likely to be more closely watched. India’s challenge is to be able to grow its global supply chain and ensure its legitimate exports are distinguishable from goods that may have been rerouted from China to avoid U.S. tariffs.
