 Inside China? Rerouted Supply Chains |
Source |
American Shipper |
Post Date |
02/04/2026 |
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New data shows that Chinese exporters are increasingly transiting goods through lower-tariff trade partners. But is the practice legal?
Morale was low in a WeChat group of roughly 250 Chinese manufacturers and e-commerce sellers late last April, when combined tariffs on Chinese imports to the United States sat at 145 percent.
?his is it. The U.S.-China relationship is over,?said one member in the Chinese messaging app.
?f only Kissinger were alive,?said another.
By September 2025, exporters in the group were feeling the effects of the highest statutory tariff rates on U.S. imports in over 100 years.
The share of U.S. imports originating from China had plunged from a 2017 high of 22 percent to just 9 percent by July 2025, a low not seen since China? accession year to the World Trade Organization a quarter of a century earlier.
Steven Lu, chief utive of Shenzhen Topology, a consultancy that helps Chinese e-commerce sellers enter overseas markets, administers the group chat.
Trump announced ?eciprocal tariffs?on April 2, 2025 ?so-called ?iberation Day.?But Lu? clients, indepent vors and manufacturers who supply shopping platforms like Shein and Temu, had already begun shifting supply chains to Southeast Asia before then, he said.
?.S. tariffs don? Chinese exports. They reroute them,?said Lu in an interview in January 2026.
New data released last week shows that over $8 billion of Chinese exports were rerouted through Vietnam to the United States in the first three quarters of 2025, as Chinese exporters sought avenues to circumvent tariffs, according to analysis by a group of academics at Harvard, Duke and Academia Sinica, a Taiwanese research institute.
The figure, which marks a reversal after a two-year decline in rerouting, offers a rare glimpse into how Chinese exporters are transiting goods through a trade partner with a tariff differential. The tactic exposes blind spots in U.S. President Donald Trump? tariff regime that have long vexed U.S. officials.
?nytime there? a gap between country of origin-specific tariffs, you an impetus for some transshipment to happen,?said Ebehi Iyoha, an assistant professor at Harvard who shared the data in a memo in January ahead of s to a 2025 working paper she co-authored with academics Edmund Malesky, Jaya Wen, and Sung-Ju Wu.
The authors define rerouting, another term for transshipment, as the process of exporting to the United States goods that were produced entirely in China and pass through Vietnam ?ithout substantial transformation or value added.?
Last year, tariff rates on Chinese exports exceeded 100 percent at times, though levels have since eased to between 20 and 30 percent on most goods. Vietnamese exports are subject to a 20 percent tariff.
?ur data suggest that there was substantial transshipment last year when this gap existed, especially given that some Chinese-owned establishments in Vietnam were already set up to take advantage of the opportunity,?Iyoha said.
To identify rerouting cases, the authors tracked products imported from China into a Vietnamese province and then exported from that province to the United States within the same quarter.
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However, the estimates are not designed to determine the legality of transshipment cases, Iyoha said.
William Reinsch, a senior advisor at the Center for Strategic and International Studies and former under secretary of commerce for export administration during the Clinton administration, said transshipment is an ?lastic concept.?
?t hasn? been defined in the various U.S. agreements that mention it,?he said.
Some transshipment, such as mislabeling a country? origin, is outright fraud, while other cases dep on how you define the term, he noted.
?or example, a steel slab produced in China is exported to South Korea, where it is rolled into a sheet, strip, or wire. Under international customs rules, that is a substantial transformation that has d a sheet, strip, or wire ?a product of South Korea. But some people would argue that because the slab originated in China, it is actually a Chinese product being transshipped,?said Reinsch.
U.S. Customs and Border Protection defines transshipping as the ?rocess of transferring goods from one mode of transportation to another (often from one vessel or port to another) during their journey from origin to destination,?a ?ommon?practice that becomes illegal when used deceptively to evade tariffs.
Edmund Malesky, a professor of political economy at Duke, said that the process for determining what qualifies as a substantial value-added transformation can be highly complex.
For some imports such as semiconductors, inputs and exports share the same 8-digit product code, he noted.
?ntel imports semiconductors and then dyes them in Vietnam. And even though dyeing is a value-added step, it doesn? actually change the product code,?he said.
Trump administration officials have invoked the illegal transshipment of Chinese goods through third countries as a neat explanation for a record slide in Chinese exports to the United States and a surge in Vietnamese shipments last year.
In 2025, China? exports to the U.S. fell by 20 percent, according to China customs data. Meanwhile, Vietnam? exports to the United States. rose 28 percent year-on-year according to Vietnam trade data.
Peter Navarro, one of Trump? advisers who has been vocal about cracking down on transshipment, said Vietnam is ?ssentially a colony of communist China?in an April Fox News interview.
In July, under the trade deal negotiated with Vietnam? government to reduce the Liberation Day tariffs, Trump announced that goods ?ransshipped?to the United States through Vietnam would face a punitive 40 percent tariff. That? double the rate for regular imports from Vietnam, a measure meant to crack down on rerouting.
A decline in Chinese exports and a rise in Vietnamese imports to the United States does not prove fraudulent transshipment.
However a 2025 report by economists at Harvard and Dartmouth found that goods in which Vietnam saw its largest growth in exports to the United States, such as lower- electronics like headphones, mirror closely those in which China saw reductions, raising the question of rerouting.
An employee at a Shenzhen-based headphone manufacturer who requested anonymity said that there are downsides to fully relocating production and assembly to Vietnam and other lower-tariff countries.
?ur company is indeed ing up factories in Vietnam due to the tariffs, but it? a very long process,?she said.
?n Vietnam, you need to understand how to organize and communicate with local workers. Manufacturing in China is important for us to reduce production costs.?
That said, the inconvenience of shifting supply chains to Vietnam has not stopped billions of dollars?worth of goods from being redirected to the United States. Moreover, regardless of their legality, import data shows that transshipment methods continue to leave the United States highly depent on Chinese-made goods.
Davin Chor, an economist at Dartmouth and a co-author of the aforementioned paper, said Trump? tariffs are best understood as a move to curb depence on China.
?t heart, the deeper causes of concern are related to national security and supply chain resilience,?he said, adding that both pure rerouting or legally relocating production to third countries are causes of concern for U.S. officials.
?he Trump administration is basically saying ?ou can go ahead and measure how much of the value of these goods is ultimately of Chinese origin. We think it? a high number. And we?e just gonna go ahead and shut it down.?
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