The United States has accused India of helping China bypass tariffs through shadow transshipment networks, signalling escalating tensions in US-India trade relations and increased scrutiny of India’s manufacturing sector.
The United States has widened its trade scrutiny of India, naming the country in a White House report that accuses more than 40 nations of helping China sidestep tariffs through a shadow transshipment network. The report, titled “The Great Transhipment Scam”, says India is among the economies where Chinese exports are allegedly rerouted, lightly altered and relabelled before entering the U.S. market. It singled out the Pune-Gujarat-Chennai manufacturing corridor as an area that, in Washington’s view, is helping China evade duties while distorting supply chains in the U.S.
The allegations land at a sensitive moment in U.S.-India trade relations. Washington has already imposed a 10% tariff on India over what it sees as insufficient action against imports linked to forced labour, and it is moving towards legislation that could raise tariffs on India by as much as 100% over Russian oil purchases. At the same time, the U.S. Trade Representative is investigating excess industrial capacity, a probe that could lead to more trade penalties.
According to the White House report, the basic mechanism is simple: when Chinese goods face steep U.S. duties, exporters can reduce costs by routing products through countries with lower tariff exposure. The report says this difference creates the incentive for limited assembly, repackaging, relabelling and paperwork changes that make goods appear to have a different origin. It says the practice has expanded since the U.S. imposed tariffs on Chinese goods in 2018 and added another round of forced-labour-related duties in July 2026.
The report groups the countries it names into tiers, with India placed in the highest-risk category alongside Canada, the European Union, Israel, Japan, Mexico, South Korea, Taiwan and others. It claims that roughly $67 billion in U.S.-bound goods were transshipped from China through major hubs including Mexico, India and Vietnam in 2025, causing an estimated $28 billion in lost tariff revenue. The broader concern fits a pattern of tighter U.S. enforcement: in September 2025, U.S. Customs and Border Protection opened an investigation into Waaree Energies, the Indian solar company, over alleged evasion of duties on Chinese-made solar cells and panels by labelling them as Indian products. Waaree said it would cooperate with that probe.
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