The $8 Billion Detour: How China's Exports Found New Routes Despite Trump's Tariffs

$8 billion worth of Chinese goods took a detour through Vietnam to reach American consumers in 2025. Despite Trump's tariffs reaching as high as 145% on Chinese imports, the flow of goods didn't stop—it just found new pathways.

The mood was grim in a WeChat group of 250 Chinese manufacturers last April. "This is it. The U.S.-China relationship is over," one member typed. Another lamented, "If only Kissinger were alive." Yet by January 2026, these same exporters had discovered something crucial: tariffs don't end trade, they redirect it.

The Great Supply Chain Shuffle

The numbers tell a dramatic story. China's share of U.S. imports plummeted from a 2017 peak of 22% to just 9% by July 2025—the lowest since China joined the WTO 25 years ago. Meanwhile, Vietnam's exports to the U.S. surged 28% year-on-year.

New research from Harvard, Duke, and Taiwan's Academia Sinica reveals that over $8 billion in Chinese exports were rerouted through Vietnam in just the first three quarters of 2025. This marks a sharp reversal after two years of declining transshipment activity.

Steven Lu, CEO of Shenzhen Topology, puts it bluntly: "U.S. tariffs don't end Chinese exports. They reroute them." His clients—small manufacturers supplying platforms like Shein and Temu—had already begun shifting operations to Southeast Asia before Trump's "Liberation Day" announcement.

The Gray Zone of Global Trade

But here's where it gets complicated: what exactly constitutes illegal transshipment versus legitimate trade? William Reinsch, a former Clinton administration commerce official, calls transshipment an "elastic concept" that hasn't been clearly defined in U.S. trade agreements.

Consider this scenario: a steel slab produced in China gets exported to South Korea, where it's rolled into sheets. Under international customs rules, that's a "substantial transformation" making it a Korean product. But critics argue it's still fundamentally Chinese steel being transshipped.

The complexity deepens with high-tech goods. Intel imports semiconductors to Vietnam for dyeing—a value-added process that doesn't change the product code. Is this legitimate manufacturing or sophisticated transshipment?

Vietnam's Unexpected Windfall

The Trump administration has taken aim at what it sees as Vietnamese complicity. Peter Navarro called Vietnam "essentially a colony of communist China" and imposed a punitive 40% tariff on goods deemed to be transshipped through Vietnam—double the rate for regular Vietnamese imports.

Yet manufacturers face real constraints in relocating. A Shenzhen headphone manufacturer employee explains: "Our company is opening factories in Vietnam due to tariffs, but it's a very long process. You need to understand how to organize and communicate with local workers. Manufacturing in China remains important for reducing production costs."

The Resilience of Global Supply Chains

Dartmouth economist Davin Chor suggests Trump's tariffs are best understood as an attempt to reduce Chinese dependence rather than eliminate trade. "At heart, the deeper causes of concern are related to national security and supply chain resilience," he notes.

But the data reveals a stubborn reality: whether through pure rerouting or legitimate production relocation, American consumers remain heavily dependent on Chinese-made goods. The $8 billion figure likely understates the true scale, as it only captures goods that can be clearly tracked through Vietnam within the same quarter.

The Broader Implications

This trade rerouting phenomenon extends far beyond U.S.-China relations. It highlights fundamental questions about how global commerce adapts to political barriers. Companies like Samsung and Apple have spent billions diversifying their supply chains, yet complete decoupling from China remains elusive.

For American consumers, the impact is mixed. Prices have risen due to tariffs, but product availability hasn't significantly decreased. For policymakers, the data suggests that tariffs are a blunt instrument that may reshape trade flows without achieving strategic objectives.

The story of Vietnamese transshipment also reveals the unintended consequences of trade policy. Vietnam has become an unexpected beneficiary, attracting investment and manufacturing capacity that might otherwise have remained in China or gone elsewhere.