Trump’s threatened 40% tariff on ‘transshipped’ goods tries to target China and its manufacturing strength

·Tariffs and tradeTrump’s threatened 40% tariff on ‘transshipped’ goods tries to target China and its manufacturing strengthBy AFPBy AFP The tranche of "recical" tariff hikes, taking aim at what Washington deems unfair trade practices, impacts dozens of economies from Taiwan to India.Win McNamee—Getty ImagesAs the United States ramps up tariffs on major trading partners globally, President Donald Trump is also disrupting strategies that could be used—by Chinese companies or others—to circumvent them

The tranche of “recical” tariff hikes, taking aim at what Washington deems unfair trade practices, impacts dozens of economies from Taiwan to India

The transshipment rule does not name countries, but is expected to impact China significantly given its position as a manufacturing powerhouse

Washington ly wants to develop supply chains that are less reliant on China, analysts say, as tensions simmer between the world’s two biggest economies and the U.S. sounds the alarm on Beijing’s excess industrial capacity

But “it’s a little more the short-term effect of strengthening the tariff regime than it is a decoupling strategy,” said Josh Lipsky, chair of international economics at the Atlantic Council. “The point is to make countries worried it and then have them err on the side of not doing it, because they know that Trump could then jack up the tariff rates higher again,” he added, referring to tariff evasion

The possibility of a sharply higher duty is a “perpetual stick in the negotiations” with countries, said Richard Stern, a tax and budget expert at the conservative Heritage Foundation

He told AFP that expanding penalties across the globe takes the focus away from Beijing alone

And Brookings Institution senior fellow Robin Brooks pointed to signs this year of significant transshipments of Chinese goods

While it is un if all these ducts end up in the United States, Brooks cast doubt on the lihood that domestic demand in countries Thailand and Vietnam rocketed right when Trump imposed duties. “One purpose of the transshipment visions is to force the development of supply chains that exclude Chinese inputs,” said William Reinsch, senior adviser at the Center for Strategic and International Studies. “The other purpose is to push back on Chinese overcapacity and force them to eat their own surpluses,” he added

But Washington’s success in the latter goal depends on its ability to get other countries on board. “The transshipment penalties are designed to encourage that,” Reinsch said

Lipsky added: “The strategy that worked in the first Trump term, to try to offshore some Chinese manufacturing to other countries Vietnam and Mexico, is going to be a much more difficult strategy to execute now.” China response? Lipsky noted that Beijing could see the transshipment clause as one targeting China on trade, “because it is.” “The question is, how China takes that in the broader context of what had been a thawing relationship between the U.S. and China over the past two months,” he added

While both countries temporarily lowered triple-digit tariffs on each other’s exports, that truce expires August 12

The countries are in talks to potentially extend the de-escalation, although the final decision lies with Trump

It will be tough to draw a line defining duct origins, analysts say

Customs fraud has been illegal for some time, but it remains un how Washington will view materials from China or elsewhere that have been significantly transformed

The burden lies with customs authorities to identify transshipment and assess the increased duties. “That will be difficult, particularly in countries that have close relations with China and no particular incentive to help U.S

Customs and Border tection,” Reinsch added.