U.S. says Canada among China’s ‘biggest enablers’ in avoiding Trump tariffs

The Trump administration has identified Canada as one of China's key facilitators in evading U.S. tariffs through transshipment, a practice the White House claims costs billions in lost tax revenue. The Office of Trade and Manufacturing Policy released a report titled "The Great Transshipment Scam" on Thursday, which alleges China routes its exports through third countries with more favorable U.S. tariff rates.

This "shadow transshipment network" involves about 40 countries, including Canada, according to the report. The U.S. describes this as a sophisticated form of smuggling disguised as legitimate trade. Countries such as Mexico, Canada, the European Union, India, Japan, and South Korea are among the "Diversified Scale Leaders" identified in the report.

These nations, along with others like Israel and Taiwan, are considered "logistics-side nodes" where the primary activity is not manufacturing but routing, consolidation, warehousing, and other paper-based changes. The report estimates that U.S. federal tax revenues are losing between $19 billion and $26 billion annually due to Chinese transshipment, resulting in 450,000 job losses and up to $150 billion in reduced GDP.

The White House claims that Canada benefits from the Canada-U.S.-Mexico Agreement on Free Trade (CUSMA) by diverting exports through Canadian or Mexican ports, thus avoiding additional U.S. tariffs. The report comes at a time when trade negotiations between Canada and the U.S. are ongoing, aiming to reduce sectoral tariffs, avoid a new 50% tariff set to take effect soon, and renew the CUSMA agreement.

It also precedes a planned visit by Chinese President Xi Jinping to Washington in September, following Trump's own trip to Beijing in May. The U.S. Customs and Border Protection is reportedly testing an AI-driven system, dubbed "the AI Detective Border," to detect and prevent transshipments.