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- Trump's focus on a transshipping loophole could reorder how global trade works</p>
<p>Ben WerschkulJuly 13, 2025 at 4:30 PM</p>
<p>President Trump has made the issue of transshipping a centerpiece of his latest trade efforts.</p>
<p>He announced a Vietnam deal in which tariffs are doubled on any such product and included language on the issue in letters sent to more than two dozen trading partners this past week including Saturday letters with 30% tariffs on both the European Union (EU) and Mexico.</p>
<p>The focus is partly a nod to Trump's larger standoff with China, which has been accused of using the practice as a way to skirt trade barriers placed on its own country.</p>
<p>And the issue is a global one with Trump also warning other trading partners around the globe from doing their own transshipping and with some of Trump's moves leaving trade watchers with a sense that the president is looking to expand the definition of the term.</p>
<p>Transshipping is traditionally defined as when cargo makes essentially a pit stop in a third country. Cargo can, say, move from one boat to another but the commonly agreed-upon rules are that the "origin" (and tariff rate) remains with the initiating country in such a scenario.</p>
<p>It becomes the product of this middle country only with "substantial transformation."</p>
<p>That's where things get tricky — and what many view as a loophole Chinese shippers have been exploiting for years.</p>
<p>President Trump speaks to reporters at the White House on July 11. (Celal Gunes/Anadolu via Getty Images) (Anadolu via Getty Images)</p>
<p>International trade lawyer Ted Murphy noted in a blog post after the Vietnam announcement that Trump may be moving toward a broader definition in that deal to perhaps make a product assembled in Vietnam "with some amount of Chinese content" subject to the higher duty.</p>
<p>"This is a big change and could impact a significant percentage of product depending on where the threshold for Chinese content is set," he added.</p>
<p>A White House official suggested the administration's goal is best understood as an effort to find a more precise and rigorous approach to transshipping.</p>
<p>They stressed that the trade team is wrestling with nuances between some instances of clear attempts to evade tariffs and others where a manufacturer is simply bringing together a variety of components.</p>
<p>Read more: What Trump's tariffs mean for the economy and your wallet</p>
<p>But this more precise definition is still the subject of negotiations with Vietnam and others and is set to be worked out on a country-by-country basis. No universal line is likely to be drawn or necessarily even desirable, at least according to the White House view, given different country situations.</p>
<p>This focus from Trump's team has already gotten a strong reaction, with China's Commerce Ministry warning that "China will not accept it and will take resolute countermeasures" if it feels that any deal cuts them out of supply chains.</p>
<p>It's also a stance that, trade experts add, could be felt far beyond Asia.</p>
<p>"It's not just China," notes Greta Piesch, an international trade lawyer now at Wiley Rein, adding that the effect of a change in these rules could be felt "with respect to any two countries that have a different tariff rate shipping states."</p>
<p>The key question: Where exactly is the line drawn?</p>
<p>For shippers, things keenly depend on where the final line is drawn.</p>
<p>What is the tariff rate on a product assembled in Vietnam with all Chinese products? What about half? What if only one part comes from China?</p>
<p>Those are questions still being addressed, but with nearly any answer set to anger China, but also apparently bearing some fruit for the Trump administration.</p>
<p>Details are scarce on the Vietnam agreement but Reuters reported that internal documents show Vietnam appears set to implement new penalties for transshipping.</p>
<p>The White House made another trade deal with provisions that can be seen as at least an example of the team's approach to the issue: a recent agreement with the UK over steel.</p>
<p>That overall deal included a lower tariff rate for steel from the UK, but paired with significant limits on these rules of origin.</p>
<p>The standard there is a "melt and pour" one that looks at where the steel is first melted and poured into shape — not necessarily when it is used in a finished product.</p>
<p>And it comes as Trump's team is sending signal after signal that they are looking at implementing as broad a definition as possible.</p>
<p>Commerce Secretary Howard Lutnick recently defined transshipping in the Vietnam context as "if another country sells their content through products exported by Vietnam to us."</p>
<p>Another possible signal about the prominence of the issue in Trump's mind is the inclusion of transshipping language in every single one of this past week's trade letters, even in missives to places like landlocked Kazakhstan.</p>
<p>Read more: 5 ways to tariff-proof your finances</p>
<p>What this 'bipartisan concern' might mean for shippers</p>
<p>How it works out in the end remains far from certain — and far from an academic exercise among traders.</p>
<p>As Ryan Peterson, CEO of supply chain logistics company Flexport, offered in a post online: Major changes that could be coming will be paired with a fear they will "redefine the way customs law works in ways that will make global trade compliance endlessly more complicated (and expensive)."</p>
<p>He added that if Trump's team follows through on the wider approach, it "certainly will be litigated."</p>
<p>But the focus on this issue comes after years of concern — spanning presidential administrations — that tariffs on goods from China put in place during Trump's first administration led to a shift to places like Vietnam, Malaysia, and the Philippines, but with unanswered questions of how many of these goods were essentially Chinese in disguise.</p>
<p>"There have been questions and concerns about whether that's actually essentially Chinese production that is happening in those other countries," notes Piesch, who worked as general counsel in Biden's trade office, about what she adds is "a bipartisan concern ... that has gone across administrations" and something she wrestled with during her time in government.</p>
<p>The Harvard Business Review looked at the issue in the Vietnamese context. The publication found the level lower than some expected but significant nonetheless, calculating that in 2021, 16.5% of Vietnamese exports could be termed "country-level rerouting."</p>
<p>It's a concern Trump has raised again and again, including in his letters last week.</p>
<p>In each letter, Trump first tells a country the new tariff rate he has planned, before adding, "Goods transshipped to evade a higher Tariff will be subject to that higher Tariff."</p>
<p>Ben Werschkul is a Washington correspondent for Yahoo Finance.</p>
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