U.S. Accuses India of Facilitating Chinese Tariff Evasion

The U.S. government has recently accused India of playing a significant role in helping China evade tariffs, as outlined in a report titled ‘The Great Transhipment Scam’. This report suggests that India, alongside about 40 other countries, is involved in a scheme that allows Chinese goods to reach the U.S. at reduced tariffs by being routed through third-party nations.

According to the report released by the White House, these nations, including well-known trade partners like Mexico, Canada, and several European countries, are allegedly modifying Chinese products slightly before exporting them to the U.S. This practice has cost the U.S. government an estimated $28 billion in lost tariff revenue, with around $67 billion in goods transshipped from China through these hubs in 2025 alone.

The U.S. has long struggled with a significant trade deficit with China, a situation that has drawn criticism from past administrations. Under President Trump, tariffs were imposed on a wide range of Chinese goods, aiming to protect American industries. Despite these efforts, the overall imports from all countries surged from $2.41 trillion in 2018 to $3.50 trillion in 2025, indicating that the U.S. has largely replaced imports from China with goods from other nations rather than boosting domestic production.

Specific regions in India, such as the Pune-Gujarat-Chennai area, have been singled out for allegedly absorbing Chinese products like pumps and compressors, which subsequently affects supply chains in the U.S. cities of Cincinnati, Dayton, and Columbus. This situation highlights the intricate web of global trade and the challenges of enforcing tariff laws effectively.

While the report has raised serious allegations against India, it has not yet led to any immediate punitive actions. However, the possibility remains that the U.S. could impose additional tariffs on India, especially in light of past grievances, such as India's oil imports from Russia, which have also drawn scrutiny from the U.S. Senate.

Ajay Srivastava, founder of the Global Trade Research Initiative, noted that while tariffs have shifted the sources of imports, they have not significantly reduced America's reliance on foreign goods. This trend places India in a precarious position, as any punitive measures from the U.S. could hinder its manufacturing sector, which has increasingly relied on intermediate goods from China.

India's trade dynamics are evolving, with a growing emphasis on manufacturing domestically and exporting finished goods. However, the dependence on imports from China remains substantial, raising concerns about the potential impact of U.S. tariffs on India's economic growth and its 'Make in India, For the World' initiative.

Source: www.thehindu.com