At the Foundation for Economic Education, Jake Scott explains Donald Trump’s latest anti-trade moves:
President Donald Trump’s executive order of July 31st, effective August 7th, has upended global trade dynamics in a single stroke. Slapping a 40% tariff on all “transshipped goods” — products rerouted through third countries to dodge US duties — this is merely the natural development of his evolving protectionist agenda.
Just a week after the order, the move is a clear shot at China’s sprawling manufacturing empire, which has long exploited methods like transshipment and “nearshoring” to skirt American tariffs in general, and Trump’s tariff policies in particular.
While applied globally, China stands to take the biggest hit (and likely already is), with its vast factory networks and knack for rerouting goods through Southeast Asia, Mexico, and beyond. This isn’t just a tariff hike; it’s a calculated escalation in Trump’s ongoing crusade to reshape US trade policy and the global economy in the United States’ favor. But ripple effects that bruise consumers are already visible — and this move is likely to strain relationships with key allies as well.
The new tariffs build on Trump’s first-term strategy — so extensive that it now has a Wikipedia entry — when he wielded America’s economic heft like a sledgehammer to renegotiate or smash trade deals he deemed unfair. Back then, Chinese firms sidestepped US tariffs by setting up shop in countries like Vietnam and Mexico, funneling goods through these hubs to mask their origins.
This nearshoring strategy buoyed many economies that had pre-existing arrangements with the United States or were treated more favorably than China, such as Canada and Latin American nations. It is also seen as a natural part of globalization: shipping parts from where they are constructed (like China), assembling them in developing nations (like Mexico), and then exporting to high-value markets (like the United States). Nearshoring has a long history, but the fragility of extended global supply chains was exposed in the Covid pandemic; since then, manufacturers have sought to mitigate their damage.
The US trade deficit with China (roughly $295 billion) has long been a sore point for Trump, who sees transshipment and nearshoring as sneaky workarounds. The 40% duty on these goods, layered atop existing tariffs, aims to plug this loophole. As Stephen Olson, a former US trade negotiator, noted in the New York Times, China will likely view this as a direct attempt to “box them in”, potentially souring already tense talks.
