The White House is working to crack down on countries using loopholes to evade paying President Donald Trump’s tariffs, including China, India, and Mexico.
Peter Navarro, the senior White House counselor for trade and manufacturing, briefed reporters on the initiative Thursday morning. As part of the crackdown, the Council of Economic Advisers partnered with the Commerce Department and Goldman Sachs on a report identifying which trading partners are evading tariffs by transshipping, a tactic that involves moving cargo to an intermediate destination before reaching the United States. By transshipping, countries can escape paying higher tariffs by claiming the intermediate destination as the point of origin for determining how much is paid.
According to the report, foreign countries are transshipping as much as $75 billion in goods to the U.S. each year to evade tariffs. Navarro claimed that the total worth of transhipped goods “ironically” matched the “entire” budgets of U.S. Customs and Border Protection, the Department of Agriculture, Space Force, or half of the annual U.S. Army budget.
Trump previously signed an executive order directing CBP to develop an “artificial intelligence-enabled protective border” to ascertain the specific points of origin of incoming goods. The president’s tariffs are also not limited to completed goods and cover components and certain materials, according to the administration.
The administration is specifically pointing to China, Mexico, and India as the top transhippers, and Vietnam as a top enabler of the practice. Officials say, however, the crackdown is geared toward discouraging “cheating” by all U.S. trade partners.
“When we connect the product to the factory, the factory to its owners, and the paperwork to the physical facts, tariff laundering becomes a much more dangerous business,” Navarro stated. “President Trump promised to end this racket with tougher tariffs, a smarter border, and trade deals that punish their cheats. That is exactly what we were going to do.”
“Illegal transshipment is not just a technical customs violation. It is a deliberate attempt to evade U.S. tariffs, undercut American workers and manufacturers, and deprive the American people of billions of dollars in revenue,” added Treasury Secretary Scott Bessent. “President Trump is carrying strong trade policy with strong enforcement to ensure that goods entering the United States pay the duties they owe.”
According to Navarro, if the AI protective border flags certain shipments, importers are required to verify the goods’ origin country. If they cannot prove that goods or components originate from a country with a lower tariff rate, customs will collect the higher tariff rate associated with the true point of origin, as identified by AI.
Furthermore, U.S. code allows CBP to then collect the higher tariff rate for all of an importer’s shipments for the past year, not just the shipment in question.
Navarro said Thursday that customs is currently running a pilot program, which he expected to be scaled up to full operation by the end of the year.
“This is a big one. There’s literally hundreds of thousands, if not millions, of jobs at stake,” he concluded, noting that CBP is expected to collect billions more in annual tariff revenues. “Our defense and industrial base and manufacturing industrial base is at stake, and we’re going to get a bunch more money for the American people, so we can pay for all the good things that government does.”