How big are China transshipments?

Transshipments explain all the rise in non-China exports to the US for some products

I’ve been banging on about China transshipments in recent posts. By this I mean goods going from China to the US by way of third countries in order to circumvent tariffs. I’m convinced such transshipments are happening for two reasons. First, US tariffs on China have been higher than on other countries so far this year, so there’s been an incentive for China’s exporters to try to transship goods to the US. Second, I’ve documented rampant transshipment from the EU to Russia via out-of-the-way places like Kyrgyzstan and Armenia. If the Russians can figure out how to work their way around Western export controls, China’s exporters will certainly find ways to circumvent tariffs.

However, it’s fair to say that I’m in the minority on this view. There’s a surprising level of resistance to the idea that China transships goods to the US, so today’s post starts a deeper dive on this topic. I break down US imports by product and then look at how imports from China compare to imports from the rest of the world. The breakdown of the data by product is recognition of the fact that very different forces may be at play for different goods. For example, US demand for computers and electronic equipment may be rising due to increased pervasiveness of server farms. If that kind of thing is big enough, it can throw off the overall picture and muddy the waters.

The four charts above show the 12-month change in US imports of computers and electronic products (top left), electrical equipment (top right), furniture and fixtures (bottom left) and everything else (bottom right). In each case, I distinguish between imports from China (red) and imports from everywhere else (blue). Transshipments may account for about one-third of the rise in imports of computers and electronic products from outside China, while they look like they’re nearer 100 percent for electrical equipment, appliances and components. There doesn’t appear to be much transshipment for furniture and fixtures, while there is lots of evidence of tariff front-running for US imports of everything else.

This analysis is preliminary. My intuition is that there will be lots more evidence of transshipment in the “other” category, once I break out additional products. For the three categories I do break out today, transshipments appear to plausibly range from 0 all the way up to 100 percent.