US puts India in Tier 1 category for China-linked trans-shipment risk – What does it mean?

India is placed in Tier 1, “Diversified Scale Leaders,” described as large, diversified economies in which the report finds transshipment risk mixed into otherwise legitimate trade flows. The same group also includes Canada, the European Union, Israel, Japan, Mexico, South Korea, and Taiwan.

The report does not say that all goods exported from India to the US involve illegal trans-shipment. Instead, it says Tier 1 countries have large absolute volumes of China-linked goods, diversified industrial bases and major US-bound export platforms, with potential trans-shipment risk embedded within broader legitimate trade flows.

Why has India been placed in Tier 1 and what does it mean?

The White House places India in Tier 1 because it is a large trading economy with a diversified industrial base and major exports to the US, meaning potential China-linked trans-shipment activity could be embedded within a much larger volume of legitimate trade.

The report defines “China-linked goods” as products that may not be declared as Chinese-origin when they enter the US but may have indicators of Chinese economic origin, control or content. These can include China-origin inputs or components, Chinese ownership or financing, relationships with Chinese suppliers, China-based production steps or China-origin routing histories.

The classification therefore does not mean that India’s overall trade with the US is considered illegal. Instead, the report says the potential risk is embedded within India’s broader legitimate trade flows.

What does the report exactly say about India’s involvement?

The report says China’s “Shadow Transshipment Network” operates through both production and logistics channels. Some countries may be used for light assembly, finishing, testing, packaging, labelling or component integration, while others may provide routing, consolidation, warehousing, re-invoicing, relabelling or re-export services.

For India specifically, the report identifies the Pune-Gujarat-Chennai production belt as a potential trans-shipment-risk corridor for pumps and compressors under HS codes 8413-8414. It maps this corridor to US manufacturing regions in Cincinnati, Dayton and Columbus that produce similar goods.

The report does not say that these Indian production centres are illegally trans-shipping goods. Rather, it uses the India corridor as one example of how China-linked goods and foreign production corridors could potentially place pressure on corresponding US manufacturing sectors.

White House identifies 3 tiers

The White House divides the more than 40 countries and jurisdictions into three groups based on the scale of China-linked trade, economic integration with China and the characteristics that could make them vulnerable to rerouting.

Tier 1 – Diversified scale leaders: Canada, the European Union, India, Israel, Japan, Mexico, South Korea and Taiwan.

Tier 2 – Scale leaders with significant economic integration with China: Brazil, Indonesia, Malaysia, Thailand, Turkey and Vietnam.

Tier 3 – Small, opportunistic Chinese targets: A larger group of smaller economies including Bangladesh, Cambodia, Oman, the UAE, Sri Lanka, Singapore, Panama and others.

The report says Tier 3 countries may have specific advantages such as low-cost labour, free zones, port access, bonded warehousing, niche assembly capacity or limited customs enforcement.

$67B in China-linked goods routed through India, Mexico, Vietnam

The report also cites a separate analysis by the US Commerce Department’s Office of Trade and Economic Analysis.

It estimates that approximately $67 billion in US-bound goods were transshipped from China through three major hubs – Mexico, India and Vietnam – in 2025, with an estimated $28 billion in lost tariff revenue.

However, the $67 billion figure applies to all three countries combined. The report does not give a separate $67 billion estimate for India.

The Commerce analysis used transaction-level data and identified goods where the same HS8 product was imported from China and exported to the US from the same local region in the same quarter. The White House describes this as a narrower estimate than its broader $109 billion trade-transfer benchmark.

White House says trade shifts do not prove illegal trans-shipment

The White House report says that the decline in China’s direct share of US imports and the rise in imports from the more than 40 identified trans-shipment-risk countries does not prove that all displaced Chinese trade was illegally rerouted.

The report says some of the shift shows legitimate changes in production, investment and sourcing. It says that the timing and scale of the changes warrant further investigation into how much trade was actually rerouted to evade tariffs.

To strengthen enforcement, the report outlines an AI-enabled system called “Detective Border”, which it says would help US Customs and Border Protection analyse shipment data, routing histories, product classifications, ownership relationships, production capacity and other indicators to identify potentially high-risk shipments.

The proposed system is intended to help distinguish legitimate foreign investment and nearshoring from illegal pass-through trade and improve the targeting of customs enforcement.

The White House says it is too early to determine the overall effect of the Trump administration’s tariff and anti-trans-shipment policies because trade and customs data become available with a lag and several enforcement measures remain under implementation.

The US remains India’s biggest export market. India exported $33.49 billion worth of goods to the US between April and July 2026, with shipments nearly unchanged from the same period in 2025, reported Reuters citing Indian trade data. Separately, US Census Bureau data shows that US goods imports from India stood at $40.41 billion in January-May 2026, while US exports to India were $21.87 billion during the period, as reported by Reuters. The resulting US goods trade deficit with India was $18.54 billion, down from $29.03 billion in the same period in 2025.