Trump Targeting Trade Loopholes Risks 70% of China Exports to US

On July 22, 2025, Bloomberg Economics released an analysis highlighting the potential severe impact of President Donald Trump’s trade policies on China. By targeting transshipment practices—where Chinese goods are routed through third countries to evade US tariffs—the administration could threaten up to 70% of China’s exports to the United States, equivalent to more than 2.1% of China’s gross domestic product (GDP). This escalation builds on Trump’s broader tariff strategy, which has already imposed rates as high as 145% on direct Chinese imports, prompting Beijing to rely increasingly on indirect routes.

The Rise of Transshipment and Loopholes

Transshipment involves shipping Chinese components or finished goods to intermediary countries like Vietnam, Mexico, Malaysia, Thailand, and Indonesia, where they are minimally processed or relabeled before export to the US. This tactic has surged since Trump’s first trade war in 2018, allowing China to circumvent tariffs. According to Bloomberg Economics, China’s share of value-added manufacturing in US-bound goods via these third countries rose from 14% in 2017 to 22% in 2023.

Key intermediaries include:

• Mexico and Vietnam as the largest hubs.
• The European Union as a significant channel.
• ASEAN nations like Malaysia (threatened with 25% tariffs), Indonesia (32%), Thailand and Cambodia (36%) if they fail to curb transshipments.

The Trump administration has addressed this through bilateral deals, such as the recent agreement with Vietnam imposing a 40% tariff on transshipped Chinese goods. Similar “anti-China clauses” appear in the US-UK trade deal, focusing on supply-chain security. Letters sent to over 75 countries warn of tariffs ranging from 10% to 70% starting August 1, 2025, unless deals are reached, with higher rates for non-compliance or transshipment facilitation.

Economic Impacts on China and Global Trade

If enforced, these measures could disrupt 70% of China’s $500 billion-plus annual exports to the US, potentially reducing Chinese GDP by over 2.1%. Analysts warn of broader damage if partners reduce business with China due to US pressure, eroding long-term growth. China’s exports to the US have already dropped 21% under existing tariffs, but transshipments have cushioned the blow.

For the US, tariffs aim to boost domestic production and revenue, but they raise costs for importers—effectively a tax on American businesses and consumers. The Tax Foundation estimates Trump’s tariffs could add nearly $1,300 per household in 2025, with overall rates rising to 16.8% on imports. Retaliation from China (125% on US goods) and others has hit sectors like agriculture, with US exports facing barriers. Globally, this could reroute supply chains, increase inflation, and slow growth, as seen in the 2018-2019 trade war.

Political and Industry Reactions

Trump’s team views this as closing loopholes exploited by China, with deals like Vietnam’s seen as successes. Supporters on X praise it as “cutting off China’s escape valves.” Critics, including US exporters, fear retaliation harming industries like bourbon and chemicals, as seen in prior rounds. China has warned nations against deals at its expense and imposed countermeasures, including 34% tariffs on US exports.

US businesses brace for fallout, with some like the American Chemistry Council lobbying to avoid targeting. On X, users debate price hikes, with one noting, “Trump tells every American Company they now have to pay 30% to 150% more.” Others highlight investments in US manufacturing to bypass tariffs.

Broader Context in Trump’s Trade War

This fits Trump’s “America First” agenda, using tools like Section 232 and the International Emergency Economic Powers Act (IEEPA) for tariffs on steel, aluminum, and critical minerals. Over 75 countries have been approached for deals, with pauses for negotiations but hikes for delays. China missed Phase One deal targets by 42%, exacerbating tensions. Recent moves include restricting AI chip exports to Malaysia and Thailand to block smuggling to China.

Future Outlook

Enforcement remains uncertain, with vague definitions of “localized goods” and verification challenges. If successful, it could force supply chain reshoring to the US, boosting jobs but raising prices. However, legal hurdles—like court rulings against some IEEPA tariffs—and market volatility (e.g., bond crashes) may temper implementation. As deadlines approach, more deals or escalations are likely, reshaping global trade dynamics.