U.S. Report Accuses India of Helping China Evade Tariffs: Explained

The United States has once again named India as a country allegedly engaged in unfair trade practices. In a new report titled ‘The Great Transhipment Scam’, the White House has accused around 40 countries, including India, of helping China bypass U.S. tariffs.

The report, released by the Office of Trade and Economic Analysis (OTEA), alleges that Chinese exporters have increasingly routed goods through third countries since 2018 to evade tariffs imposed by the U.S. “Products that previously moved directly from China to the United States were shipped through jurisdictions where limited assembly, finishing, repackaging, relabeling, or documentation changes could create the appearance of a different national origin,” the report states.

The U.S. and China have deeply intertwined economies over the past three decades, with the U.S. relying on China as its manufacturing base and China using the U.S. as a key market and investor. This relationship has resulted in large U.S. trade deficits with China. In 2018, under President Donald Trump, the U.S. imposed tariffs ranging from 7.5% to 100% on Chinese goods under Section 301 of the Trade Act of 1974, citing unfair trade and technology practices. According to the report, these tariffs initially reduced the U.S. trade deficit with China in 2019 and 2020. On July 24, 2026, the U.S. added a further 12.5% tariff related to forced-labour compliance gaps.

The report identifies more than 40 countries as having “elevated illegal transshipment risk,” with India among the top “enablers” along with Mexico, Canada, the European Union, Japan, and South Korea. The allegation is that these countries import Chinese goods, make minor modifications, and then export them to the U.S. at lower tariffs, causing significant revenue loss for the American government. The OTEA estimates that approximately $67 billion in U.S.-bound goods were transshipped from China through Mexico, India, and Vietnam in 2025, resulting in an estimated $28 billion in lost tariff revenue.

As an example, the report highlights the Pune-Gujarat-Chennai production belt in India, claiming it “absorbs” pumps and compressors from China, thereby affecting industrial supply chains in Cincinnati, Dayton, and Columbus in the U.S.

Broadly, the report indicates that the U.S. tariff policy has failed to reduce overall U.S. imports and boost domestic production. While U.S. imports from China fell from $525.8 billion in 2017 to $327.5 billion in 2025, total U.S. imports from all countries rose sharply from $2.41 trillion to $3.50 trillion. As Ajay Srivastava, founder of the think tank Global Trade Research Initiative (GTRI), noted, “Trump’s tariffs changed the source of imports but failed to reduce America’s overall dependence on imported goods.”

For India, this is yet another instance of the U.S. finding fault with its trade policies. During his first term, President Trump criticized India’s tariffs on luxury motorcycles, after which India reduced them. The latest allegations could lead to renewed scrutiny of India’s export practices and potentially trigger further trade actions from Washington.

While India has not officially responded to the report, trade experts suggest that the allegations may be part of a broader U.S. effort to pressure trading partners on tariff and non-tariff barriers. The implications for India’s trade relations with the U.S., its largest trading partner, remain to be seen.