Trump’s Crackdown On China’s Trade Workarounds Could Hit 70% of Exports To US, Erode GDP: Report

U.S. President Donald Trump’s intention to curb Chinese transshipments through third-party countries threatens to erode the economic growth of Asia’s largest economy, as well as its exports, a Bloomberg Intelligence report said.

According to a Bloomberg News report, citing the study, the measures could threaten 70% of China’s exports to the U.S. and more than 2.1% its gross domestic product. The report added that there’s a risk of additional economic damage if the U.S. President’s moves discourage other countries from conducting trade with Beijing.

Ever since the first Trump administration’s trade war, China has been increasingly looking at completing the final stage of production in third countries to avoid tariff barriers. The report found that China’s share of total value-added manufacturing of goods destined for the U.S. through countries such as Vietnam and Mexico increased to 22% in 2023, up from 14% in 2017.

Bloomberg Economics analysts reportedly noted that trade flows via third countries are substantial and have helped China mitigate the impact of existing U.S. tariffs. However, they warned, “Tighter controls on these shipments would increase the damage from the trade war and could erode growth opportunities in the long term.”

Retail sentiment on Stocktwits about iShares China Large-Cap ETF (FXI) was in the ‘extremely bullish’ territory at the time of writing.

The U.S. has already issued letters to several trading partners, notifying them of reciprocal tariffs that will take effect on Aug. 1. The Trump administration has also warned that any countries facilitating China’s transshipments would face even higher tariffs. 

Several Southeast Asian countries have already announced steps to prevent Chinese firms from issuing labels such as ‘Made in Vietnam’ or ‘Made in Cambodia’ unless the goods are mainly manufactured in those countries.

However, the analysts pointed out, “Uncertainty clouds how rigorously the U.S. will be able to enforce transshipment restrictions. U.S. definitions of localized goods remain vague, and details on verification are lacking.”

Also See: JPMorgan Reportedly Plans To Lend Against Bitcoin, Ethereum As Wall Street Warms Up To Crypto

For updates and corrections, email newsroom[at]stocktwits[dot]com.