New report finds nearly one in five dollars of diverted Chinese trade is being rerouted back into the U.S. market through third countries
WASHINGTON, D.C. — One year after the Trump administration’s “Liberation Day” tariff escalation, the Coalition for a Prosperous America (CPA) is releasing a report, “Washington’s $70 Billion in Lost Protection: Liberation Day, One Year Later,” launching the first installment of CPA’s China Transshipment Monitor (CTM). The CTM is a data-driven tool tracking how Chinese goods are rerouted through third countries to evade U.S. tariffs, and how policy and enforcement gaps are costing American manufacturers and taxpayers billions in lost protection.
The CTM combines HS6-level customs data from Global Trade Tracker and USITC DataWeb across seventeen third-country trading partners to identify high-risk transshipment corridors, quantify lost tariff revenue, and measure the widening gap between what the U.S. tariff schedule prescribes on Chinese imports and what the U.S. Treasury Department actually collects.
This timely report lands just as Washington weighs further trade enforcement steps and approaches the July 2026 renegotiation of the U.S.-Mexico-Canada Agreement (USMCA) — a corridor the new report identifies as carrying the widest tariff gap of any trade route in the analysis, even though its trade volume is comparatively small.
“China has spent years adapting to U.S. tariffs by rerouting supply chains through third countries, and one year after Liberation Day, the data shows just how costly that adaptation has become,” said Mihir Torsekar, CPA senior economist and author of the report. “Nearly a fifth of the Chinese trade that left the U.S. market over the past year shows signs of coming right back in under a different country’s label. But the bigger story is that most of the $70 billion gap isn’t China’s doing at all — it’s the product of exclusions, deferrals, and enforcement choices Washington has made on its own tariff regime.”
Key Findings include:
- One year after Liberation Day, the gap between what the U.S. tariff schedule prescribes on Chinese imports and what the Treasury actually collected reached an estimated $70 billion — $66 billion from structural leakage (exclusions, bonded warehouse deferrals, and enforcement shortfalls) and $4 billion from transshipment through third countries.
- Chinese exports to the United States declined by an annualized $122 billion during the thirteen months following Liberation Day. Of that, $75 billion (61%) was redirected to the seventeen third-country markets tracked by the CTM.
- CPA identified $14 billion in estimated transshipment exposure — roughly 19%, or nearly one in five dollars, of diverted Chinese trade shows statistical patterns consistent with being rerouted back into the U.S. market through intermediary countries.
- The statutory U.S. tariff rate on Chinese imports has averaged 62% since Liberation Day, but the Treasury has collected at an effective rate of only 38% — a gap that has persisted since 2019.
- ASEAN is the dominant transshipment corridor, absorbing $9 billion of the $14.4 billion total (61% of global exposure) and showing the highest rerouting intensity of any partner grouping, concentrated in electronics assembly operations in Vietnam, Thailand, and Malaysia.
- Mexico and Canada carry comparatively small transshipment volumes ($724 million combined) but the widest tariff gap of any corridor — more than 30 percentage points below China’s effective rate — a finding directly relevant to the July 2026 USMCA renegotiation.
Sectors most exposed to transshipment include:
- Computers and computing parts
- Telecommunications equipment
- Electrical machinery
- Batteries and energy storage equipment
- Auto parts
Together, computers, telecom equipment, and electrical machinery account for 41% of total estimated transshipment exposure, flowing overwhelmingly through ASEAN assembly operations.
“The China Transshipment Monitor shows why broad tariff actions must be followed by targeted, product-specific enforcement,” said CPA President Jon Toomey. “Trade policy is not a ‘set it and forget it’ exercise. As tariffs are imposed, supply chains shift and production moves to third countries. With China in particular, undervaluation is masking the true import volume — driving down the trade deficit in dollars while actual import counts are rising. That’s why policymakers need to consider specific tariffs assessed on volume, aimed at products where reshoring is the goal.”
The CTM’s methodology tracks declining Chinese exports to the United States against rising Chinese exports to third markets and corresponding increases in U.S. imports from those same markets, using proportional allocation to avoid double-counting. CPA hopes to share the monitor with both U.S. Government sources, as well as within the U.S. manufacturing industry, as an enforcement screening tool designed to flag high-risk trade corridors and sectors for further investigation, not a forensic estimate of confirmed evasion.
The report outlines five policy recommendations, including: 1) narrowing product exclusions and sunsetting bonded warehouse deferrals; 2) tightening USMCA rules of origin ahead of the July 2026 renegotiation; 3) expanding CBP enforcement in Southeast Asian corridors; 4) requiring quarterly public reporting on the statutory-to-collected rate gap: and 5) investigating transshipment in strategically sensitive categories such as semiconductors.
CPA believes that the CTM will remain an essential resource for lawmakers, trade agencies, customs officials, and domestic industries seeking stronger enforcement against tariff circumvention and a more resilient American manufacturing base.
“Our findings show that nearly one in five dollars of diverted Chinese trade is returning to the U.S. through intermediary countries,” Toomey continued. “If we want tariffs to rebuild domestic manufacturing and reduce strategic dependence on China, we must continuously monitor trade flows, close loopholes, and apply targeted measures where the data shows vulnerabilities.”
CPA will continue to update the critical monitoring tool as new trade data becomes available, allowing policymakers in Washington to track evolving transshipment patterns, assess enforcement effectiveness, and evaluate whether tariff exclusions and loopholes are undermining U.S. trade objectives.
To read the full report, click here.
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