How Trump’s crackdown on tariff evasion could disrupt global supply chains

US President Donald Trump

President Trump’s campaign to close loopholes in his China tariff regime is expanding rapidly—but it may be setting up a new logistical nightmare for global trade. The administration is rolling out two-tier tariff agreements with countries like Vietnam and Indonesia aimed at curbing a practice called transshipment, where Chinese goods are routed through third countries to avoid sky-high US import taxes, the Washington Post reported.

The push to stop tariff dodging

Since Trump raised tariffs on Chinese goods to 145% in April (before dialling them back), many manufacturers have routed goods through Southeast Asia, especially Vietnam and Malaysia. These goods are often repackaged and relabelled to appear as if they originate outside of China—sidestepping tariffs. In response, Trump’s team has struck early-stage deals with Vietnam and Indonesia that impose lower tariffs (around 20%) on locally made goods and a steep 40% duty on any imports suspected of originating from “nonmarket economies” like China and Russia.

Complex rules, unclear deadlines

The system hinges on a notoriously tricky concept in trade law: “rules of origin,” which determine where a product is truly made. But these rules, often hundreds of pages long, haven’t been finalized, and trade experts doubt they’ll be ready before Trump’s Aug. 1 deadline for the new tariffs. Without those rules, companies won’t know which goods will be taxed at what rate—causing confusion across Asia’s supply chains.

A risk to just-in-time trade

Experts warn that the two-tier system could bog down global trade in paperwork, customs disputes, and shipping delays. “It’s a frontal assault on globalized supply chains,” said Chris Rogers of S&P Global. Others, like trade attorney Douglas Jacobson, say the system rests on subjective judgments about what counts as “substantial transformation”—raising the risk of inconsistency and enforcement problems.

Enforcement challenges remain

US Customs already flags suspicious trade flows using digital tools. But Trump’s Justice Department is now elevating customs fraud as a federal prosecution priority. Officials say Chinese firms are openly offering services to repackage goods in countries like Vietnam and Malaysia and create fake paperwork to clear US customs. Yet experts like David Murphy, a trade lawyer, say these cases are hard to prove, and question whether the added bureaucracy will deter determined cheaters.

Incentives to cheat still strong

The gap between the current 145% tariff on Chinese goods and the 40% transshipment rate remains wide—and tempting. As Caroline Freund of UC San Diego notes, “Where there is a big arbitrage opportunity, people are going to take advantage of it.” Unless tariffs on direct Chinese imports are lowered to closer match those on Southeast Asian transshipped goods, she warned, evasion will likely continue.

Trump’s latest trade crackdown may aim to bolster domestic manufacturing—but without clear rules and coordinated enforcement, it risks tying up global trade in legal knots.