The Transshipment Alibi: What the White House Report Leaves Unasked

WASHINGTON, 18 AUGUST 2026 —

White House Report Accuses China of ‘Industrial-Scale’ Transshipment Fraud to Bypass US Tariffs

The document, titled The Great Transshipment Scam, claims that Chinese exporters exploited tariff differentials created by Washington’s 2018 and 2025 tariff hikes on Chinese goods, turning what began as small-scale evasion into a global business model.

The report asserts that transshipment—when goods are shipped through intermediary countries to disguise their origin—has become a widespread tactic to avoid higher US tariffs. While the practice is not new, the White House argues that it has now reached “industrial-scale” proportions, undermining the intended impact of tariffs meant to protect US manufacturing and defense industries.

However, the report acknowledges that quantifying the exact value of diverted Chinese exports remains difficult, presenting only suggestive evidence rather than definitive proof.

The timing of the report raises questions about its intent. Despite the imposition of punitive tariffs on Chinese goods in 2018 and 2025, US manufacturing employment has continued to decline, particularly in Rust Belt states critical to electoral outcomes. Official data cited in the report shows that total manufacturing payrolls have fallen, while the real value of manufacturing construction spending has dropped sharply from peaks during the Biden administration.

Additionally, foreign direct investment (FDI) into US manufacturing remains tepid, with only $4.6 billion in new greenfield investments and $9.6 billion in expansions of existing plants recorded in 2025.

The White House’s argument implies that tariffs would have succeeded in reviving American manufacturing if not for fraudulent transshipment. However, critics point out that the report avoids addressing broader structural issues, such as US firms’ struggles to compete on price, quality, and delivery timelines. American buyers sourcing goods have three main options: purchasing from China, switching to other foreign suppliers, or buying from US producers.

The report acknowledges some lawful shifts in production and sourcing post-2018 but does not quantify how much demand shifted to US manufacturers versus independent foreign suppliers.

The report also highlights persistent challenges in the US labor market, with 44% of manufacturers reporting difficulties in attracting and retaining workers, according to a Q1 2026 survey by the National Association of Manufacturers. Despite these hurdles, the White House frames transshipment as the primary obstacle to tariff success, effectively shifting blame away from domestic factors such as high operational costs, regulatory burdens, and workforce shortages.

The enforcement of stricter transshipment rules could have broader implications for global trade, particularly for economies like Malaysia, which serve as key transshipment hubs. Malaysian exporters, already navigating complex trade regulations, may face increased scrutiny over their supply chains. Regional trading partners, including Vietnam, India, and Mexico, could also see shifts in trade flows as US importers seek alternative sourcing destinations to avoid tariffs and compliance risks.

Trade analysts suggest that the White House’s focus on transshipment may be an attempt to justify its tariff policies amid mounting evidence of their limited effectiveness. By emphasizing foreign fraud, the report diverts attention from questions about whether US manufacturers can realistically meet increased demand or whether the tariffs themselves have distorted trade patterns in unintended ways.

Simon J. Evenett, Professor of Geopolitics & Strategy at IMD Business School and a trade policy expert, notes that the allegations of transshipment fraud serve as an “alibi” to protect the administration’s tariff strategy. “Talk about foreign cheating crowds out discussion of deficiencies in the US business environment that hold American manufacturers back,” Evenett said.

The report’s reliance on suggestive evidence rather than conclusive data further underscores the political, rather than purely economic, motivations behind the accusations.

For Malaysian businesses, the report signals a potential tightening of US customs enforcement, which could disrupt established supply chains. While Malaysia has not been directly implicated in the White House’s allegations, its role as a major transshipment hub for electronics, machinery, and other goods means it could face heightened scrutiny. Industry stakeholders in Malaysia are likely to monitor developments closely, particularly as the US continues to refine its trade enforcement strategies.

Looking ahead, the White House’s push for stricter transshipment enforcement may lead to more rigorous documentation requirements and compliance checks for exporters to the US. While the goal of protecting domestic industries is clear, the unintended consequences—such as increased trade frictions, higher costs for businesses, and uncertainty in global supply chains—could outweigh the benefits.

As the US grapples with the effectiveness of its tariff policies, the debate over transshipment fraud is likely to intensify, with far-reaching implications for trade-dependent economies across Asia and beyond.

Related: Washington