Transshipment’s Dead End

Foundation for Economic Education ^ | Wednesday, August 20, 2025 | Jake Scott

[E. Pluribus Unum]

The loophole China exploited is Trump’s next tariff target.

President Donald Trump’s executive order of July 31st, effective August 7th, has upended global trade dynamics in a single stroke. Slapping a 40% tariff on all “transshipped goods”—products rerouted through third countries to dodge US duties—this is merely the natural development of his evolving protectionist agenda.

Just a week after the order, the move is a clear shot at China’s sprawling manufacturing empire, which has long exploited methods like transshipment and “nearshoring” to skirt American tariffs in general, and Trump’s tariff policies in particular.

While applied globally, China stands to take the biggest hit (and likely already is), with its vast factory networks and knack for rerouting goods through Southeast Asia, Mexico, and beyond. This isn’t just a tariff hike; it’s a calculated escalation in Trump’s ongoing crusade to reshape US trade policy and the global economy in the United States’ favor. But ripple effects that bruise consumers are already visible—and this move is likely to strain relationships with key allies as well.

The new tariffs build on Trump’s first-term strategy—so extensive that it now has a Wikipedia entry—when he wielded America’s economic heft like a sledgehammer to renegotiate or smash trade deals he deemed unfair. Back then, Chinese firms sidestepped US tariffs by setting up shop in countries like Vietnam and Mexico, funneling goods through these hubs to mask their origins.

This nearshoring strategy buoyed many economies that had pre-existing arrangements with the United States or were treated more favorably than China, such as Canada and Latin American nations. It is also seen as a natural part of globalization: shipping parts from where they are constructed (like China), assembling them in developing nations (like Mexico), and then exporting to...

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TOPICS:
KEYWORDS: china; commerce; shipping; trade

[AZJeep]

Good!

[Seruzawa]

Lol. Every single one of these countries engaged in extreme protectionism against American products. When Trump fights back the Wall Street looters all scream, “Protectionism.”

Eff them.

[Ronaldus Magnus III]

Lol. Every single one of these countries engaged in extreme protectionism against American products. When Trump fights back the Wall Street looters all scream, “Protectionism.”

Eff them.

Excellent!!

Canada had (still has?) 200% and 300% tariffs on many USA products.

Any entity, country that will forfeit access to the American consumer by maintaining high tariffs on USA products deserves what they get.

[Sam Gamgee]

What is interesting are the new canola tariffs against Canada by China. Where is the outrage about that? Maybe Canada should put tariffs on everything that comes out of a dollar store.

[lula]

More winning!

[packrat35]

I had people telling me I did not know what I was talking about here on FR when I mentioned this going on a few months ago.

Our President agrees with me.

[packrat35]

Not only that but China has moved on to buying Australian canola oil instead now.

Canada can’t stop losing...

[Olog-hai]

Guess they’ll have to try cis-shipment instead.

[Tallguy]

The collateral damage in all this will be General Motors. They signed an engineering and production agreement with a Chinese partner who later got 51 percent of the proceeds on all vehicles sold in the US and ALL of the proceeds sold in third countries. The capstone of the plan was for China to produce GM-badged cars in Mexico. I don’t think any of that is going to happen now, and GM basically gave up the engineering technology to the Chinese partner.

https://youtu.be/guAxFDafF1o?si=QeNDYJRdXZ7gGDgS

[fastrock]

Who was the CEO at GM who was really adept at making poor business decisions.

This sounds like the type of business agreement that would be in her wheelhouse.