US accuses 40+ nations, including India, Canada, EU of running shadow network helping China dodge Trump tariffs

The United States has named India among more than 40 countries it accuses of helping China route goods through third-party markets to avoid American tariffs, and says it will deploy artificial intelligence to catch them.

The accusation comes in a report titled 'The Great Transshipment Scam', authored by Peter Navarro, Counsellor to the President for Trade and Manufacturing. The document estimates the annual value of illegally transshipped goods at between $40 billion and $303 billion, depending on the methodology used.

Who is named and why

Navarro said the countries involved spanned some of America's largest trading partners. "For years, the great transshipment scam has let Communist China launder its exports through more than 40 countries," he told reporters, naming Mexico, Canada, the European Union, India, Japan and South Korea among those included in what he called China's Shadow Transshipment Network.

The report traces the practice to 2018, when the Trump administration first imposed Section 301 tariffs on China over what it described as unfair trade practices. According to Navarro, Chinese manufacturers responded by routing goods through countries where minor processing, relabelling, repackaging or routing changes could create the appearance of a different national origin, while leaving the underlying Chinese content largely intact.

He said the strategy targeted countries with cheap labour, weak customs oversight, permissive free trade zones or preferential access to US markets.

India's Pune-Gujarat-Chennai corridor called out

The report singles out a specific Indian production belt. Navarro said India's Pune-Gujarat-Chennai corridor was being used to absorb Chinese pumps and compressors, affecting industrial supply chains in American cities including Cincinnati, Dayton and Columbus. "A Chinese pump that leaves Pune as Indian is a pump not machined in Cincinnati, Dayton or Columbus," he said.

The AI response

Washington's answer to the problem is technological. The US plans to deploy an AI-enabled "Detective Border" system designed to identify goods entering American markets through third-country routes. The system will analyse shipment data, routing histories, product classifications, ownership links, production capacity and a range of other indicators to distinguish legitimate nearshoring and foreign investment from what the report calls illegal pass-through trade.

"The objective is to improve CBP's ability to distinguish legitimate nearshoring and foreign investment from illegal pass-through trade, identify high-risk shipments, and convert analytical findings into interdiction, duty collection, penalties, and exclusion," the report said.

(With inputs from PTI)