[Finance] Tsai Ming-fang Column: "Shadow Transshipment Network" Exposed, China's Exports to Face More Challenges
RtiTalk 小編9d ago
As the United States and China continue to discuss the implementation of the agreements from the "Chuan-Xi Summit" in mid-May, the U.S. government released a report on "The Great Transshipment Scam" on the 13th of this month. The report primarily explains how China evades U.S. tariffs by transshipping goods through third countries. The report indicates that considering the U.S. government's context of $75 billion in illegal transshipments annually, China's "shadow transshipment network" is believed to have displaced 450,000 domestic U.S. jobs, resulting in a GDP loss of $113 billion to $150 billion, and consequently causing U.S. tax revenue losses of approximately $19 billion to $26 billion per year.
U.S. Classification of "Illegal Transshipment"
The "Great Transshipment Scam" report categorizes countries with a risk of illegal transshipment in trade with China into three types. The first type is "Diversified Scale Leaders," countries with diverse industrial bases and major export platforms to the U.S. within trading blocs. Taiwan, the EU, Japan, Mexico, and South Korea are all in this category. The second type is "Scale Leaders with Significant Economic Integration with China," such as Vietnam, Thailand, Malaysia, and Indonesia, which are deeply integrated into China-adjacent manufacturing networks. The third type is "Small, Opportunistic Chinese Targets," which includes many countries participating in China's Belt and Road Initiative, with Singapore also classified here.
Report Findings Align with Changes in China's Trade Routes in Recent Years
Besides the U.S., the EU and countries in the second category are China's main export markets in recent years. According to data from China's General Administration of Customs, in the first half of 2026, China's total imports and exports amounted to $3.67 trillion, an increase of 21.2% compared to the same period last year. Exports were $2.13 trillion, up 17.6% year-on-year, and imports were $1.55 trillion, up 26.6% year-on-year. In terms of trade value, China's top three trading partners are ASEAN, the EU, and the U.S. ASEAN accounts for 17.0% of China's total trade, with a prominent growth of 22.5% in the first half of the year. The EU accounts for 12.2%, with a year-on-year increase of 14.2%. The U.S. remains the largest single country, accounting for 7.9%, but with a year-on-year decrease of 0.1%.
China's trade data with its major trading partners indeed aligns with parts of the U.S. "Great Transshipment Scam" report. Amidst the trend of global supply chain restructuring, the U.S. government's specific distinction of "China content" in trade figures will inevitably compel governments worldwide to pay more attention to the issue of country-of-origin fraud for Chinese products.
With the "Shadow Transshipment Network" Exposed, Countries Will Have More Bargaining Power to Block China's Low-Price Competition
For China, economic growth in recent years has largely come from the export sector due to insufficient effective demand. Therefore, if the U.S. can effectively combat country-of-origin fraud for Chinese products, the risk of China's continued economic decline will increase. Furthermore, the EU has been facing damage to many of its countries and industries due to low-price competition arising from China's overcapacity in recent years. Taking Germany as an example, its exports to China in the first half of 2026 decreased by over 12% compared to the same period last year, while imports increased by 8.9%, widening Germany's trade deficit with China by nearly 40% to $63.56 billion.
To prevent EU industries from being continuously impacted by the low-price competition from Chinese manufacturers, the EU is not only continuing anti-dumping investigations into more Chinese products but also plans to implement an "Industrial Accelerator Act" to increase the proportion of domestic production in EU countries. To avoid escalating trade conflicts between the EU and China, both sides have established a trade and investment consultation mechanism, similar to the approach between the U.S. and China. This mechanism is divided into four working groups: trade and investment balance, export controls, intellectual property, and the WTO. The main objective is to reduce trade and investment conflicts. If the consultation mechanism operates effectively, China will be unable to continue exploiting the EU market through "low-price" tactics, and China's exports will decline.
Finally, after the U.S. released its report on country-of-origin investigations for China, many countries affected by China's origin fraud, including Taiwan, must propose credible methods to combat it to avoid further tariffs from the U.S. government. If they cannot present convincing approaches, these countries will have to reduce their imports from China to mitigate the risk of becoming tools for China's origin fraud. At this point, China's export momentum will further decrease, and China's decline will further expand.
Author: Tsai Ming-fang, Professor of Economics at Tamkang University
Source Link: https://www.rti.org.tw/news?uid=3&pid=226483
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