How Chinese companies are averting tariffs on China

Trade Dynamics - Chinese imports to the United States have significantly decreased compared to the previous year, but goods are being rerouted through other Asian countries [1] - This practice, known as transshipment, allows companies to circumvent tariffs by shipping goods through countries with lower tariff rates [2] - A significant tariff differential exists, with tariffs on Chinese imports at 30% compared to a 10% tariff on imports from other countries [2][3] - The 20% tariff difference creates a strong incentive for companies to transship goods [3][4] - Chinese companies are diversifying their production outside of China, with many companies in countries like Vietnam and Cambodia being owned by Chinese firms [4][5] - The Trump administration is aware of this practice and considered reciprocal tariffs on other Asian countries, but these were suspended [6][7] - The US is pursuing country-by-country trade deals, with Vietnam being receptive to avoid higher tariffs [8] Market Implications - The trade war creates distortions in global trading markets, leading companies to find ways to minimize costs [8][9] - Companies are motivated to ship goods at the lowest possible cost and are actively moving goods around to achieve this [9]