India should ask US to show proof of Chinese goods being routed through the country, GTRI says

The Global Trade Research Initiative (GTRI) has urged India to ask the US to provide country-, product- and shipment-level evidence for allegations that Chinese goods are being routed through India and other countries to avoid higher American tariffs.

The trade policy think tank said the Indian government should investigate products specifically flagged by Washington, seek shipment-level evidence from US authorities and ensure that legitimate Indian exporters are protected from action based on unsupported allegations.

The recommendation follows the release of a White House report, The Great Transshipment Scam: Rise, Scope, and Costs, on August 13. The 25-page report, prepared by the White House Office of Trade and Manufacturing Policy headed by Peter Navarro, accuses Chinese exporters of routing goods through more than 40 countries to avoid higher US tariffs.

The report argues that Section 301 tariffs imposed on China since 2018 reduced direct Chinese exports to the US but encouraged the development of what it calls a “Shadow Transshipment Network”.

According to the White House, Chinese goods are being relabelled, repackaged, re-invoiced or subjected to minor processing in countries facing lower US tariffs before being shipped to the American market under a different country of origin.

The report cites estimates of annual transshipment or related exposure ranging from $40 billion to $303 billion. These include estimates of $40 billion from Goldman Sachs, $60 billion from the White House Council of Economic Advisers, $75 billion from Exiger, $109 billion from the US Commerce Department and $303 billion from Altana.

GTRI questions US argument

GTRI, however, questioned the White House's conclusions and argued that the report risks confusing legitimate manufacturing using Chinese inputs with deliberate attempts to evade tariffs.

The think tank also accused the report of shifting attention from the effectiveness of US tariff policy.

US imports from China fell to $327.5 billion in 2025 from $525.8 billion in 2017. However, total US imports increased to $3.50 trillion from $2.41 trillion over the same period, according to figures cited by GTRI.

GTRI said this suggests the US replaced many Chinese finished goods with imports from other countries rather than with domestic production.

“Trump’s tariffs changed the source of imports but failed to reduce America’s overall dependence on imported goods,” GTRI said.

GTRI Founder Ajay Srivastava said China had also adapted to the tariffs by supplying more components and intermediate goods to manufacturers in countries including India, Mexico and Vietnam, as well as several European and Asian economies.

Those inputs may subsequently be processed, assembled or incorporated into finished products before being exported to the US.

Where such processing results in a substantial transformation, Srivastava argued, the finished goods are legitimate exports of the country where that manufacturing occurred and cannot automatically be treated as Chinese transshipment merely because Chinese components were used.

What the trade numbers show

GTRI pointed to trade data to argue that rising exports to the US do not, by themselves, prove that Chinese goods are being rerouted.

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, compared with a $90.2 billion increase in imports from China.

India's exports to the US increased by $40.7 billion over the period, while imports from China rose by $52.4 billion. GTRI said much of those Chinese imports were consumed within India.

India placed in highest-risk tier

The White House report places India in Tier 1 of its transshipment-risk framework alongside Canada, the European Union, Israel, Japan, Mexico, South Korea and Taiwan.

It cites a US Commerce Department estimate that $67 billion worth of goods were transshipped through India, Mexico and Vietnam in 2025, resulting in an estimated $28 billion in lost US tariff revenue.

However, GTRI said the report does not specify how much of the $67 billion was allegedly routed through India. It also does not identify an Indian exporter or cite a specific fraudulent shipment.

GTRI said India should therefore ask Washington to disclose the evidence behind its allegations before conclusions are drawn about Indian exports.

US report flags pumps and compressors from India

The White House report specifically highlights India's Pune-Gujarat-Chennai manufacturing corridor for pumps and compressors under HS codes 8413 and 8414.

GTRI said its examination of the sector showed that India already has substantial domestic manufacturing capacity in these product categories.

In FY26, India exported $1.61 billion worth of liquid pumps globally, including $414.5 million to the US, while importing $326.4 million worth from China, according to GTRI.

India also exported $1.48 billion worth of air pumps and gas compressors globally, including $335.4 million to the US. Imports from China in the category stood at $1.63 billion.

The think tank argued that the presence of Chinese imports does not by itself establish that Indian exports are merely Chinese products being rerouted through the country.

GTRI flags four problems with White House report

GTRI identified four broader concerns with the US approach.

First, it said the White House report uses a wider definition of transshipment that includes activities such as assembly, testing, finishing and component integration. GTRI warned that this could blur the distinction between origin fraud and legitimate manufacturing.

Second, the think tank questioned the use of trade correlations as evidence. A fall in direct US imports from China accompanied by higher imports from another country does not necessarily prove that the same Chinese goods were simply relabelled and rerouted, it said.

Third, GTRI argued that sharply different US tariffs across countries have themselves increased the financial incentive to disguise the origin of goods. It contrasted this with the World Trade Organization's most-favoured-nation principle, under which members generally apply the same tariff to trading partners except in permitted arrangements such as free-trade agreements.

Finally, GTRI warned that tighter US origin rules could increase compliance costs for legitimate manufacturers that rely on imported components.

The US already applies non-preferential rules of origin based on whether a product has undergone “substantial transformation”. The White House report, however, argues that existing rules remain complex and vulnerable to misuse and has called for tougher standards.

GTRI said stricter rules could create greater uncertainty for manufacturers without necessarily making deliberate customs fraud easier to identify.

It also warned that the proposed AI-enabled “Detective Border” enforcement system could result in more inspections, shipment delays, retrospective duties and penalties.

For India, the key issue is therefore likely to be the distinction between Chinese goods merely passing through the country to avoid tariffs and products genuinely manufactured in India using Chinese components. GTRI's position is that Washington should provide specific evidence before Indian exports are treated as falling into the former category.

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