• Chinese exporters are bypassing U.S. tariffs of up to 245% through transshipment and “origin washing,” often rerouting goods via countries like Malaysia.
• Authorities in Malaysia and South Korea are cracking down on fraudulent declarations to protect their reputations as trusted trade partners.
• The ongoing trade conflict between the U.S. and China is causing economic ripples, with disrupted supply chains, rising prices, and potential global impacts.

Chinese exporters are using third-country routing to sidestep steep U.S. tariffs, raising concerns about global trade integrity and economic impact. Since President Donald Trump imposed tariffs of up to 245% on Chinese imports, companies have turned to practices like “origin washing” to avoid the penalties. This strategy, facilitated by freight brokers and logistics firms, involves re-routing goods through countries like Malaysia to misrepresent their origin and qualify for lower tariffs.

U.S. Tariffs and Chinese Response

In 2018, President Trump ignited a trade war with China, citing unfair trade practices and seeking to correct trade imbalances. These tariffs, designed to pressure China economically, are among the highest ever imposed, with some reaching 245%. In response, China implemented retaliatory tariffs of up to 125% on U.S. imports.

The growing practice of transshipment has undermined these measures. Exporters reroute goods through third countries, often mislabeling their origins, to bypass the tariffs. Malaysia has become a prominent waypoint due to its lower tariff rates—24% compared to China’s far steeper penalties.

Rise of “Origin Washing” Services

Freedom-Loving Beachwear by Red Beach Nation - Save 10% With Code RVM10

On Chinese social media platforms, ads promoting “origin washing” services have surged, offering exporters a way to disguise the source of goods. For example, one ad quoted by the Financial Times read, “The U.S. has imposed tariffs on Chinese products? Transit through Malaysia to ‘transform’ into Southeast Asian goods!”

Freight brokers and logistics firms actively promote these services, raising concerns about the ethical implications and international reaction to fraudulent trade practices.

Investigations and Crackdowns by Authorities

Countries like Malaysia and South Korea are stepping up efforts to combat fraudulent declarations of origin.. Malaysia’s Deputy Minister of Plantation and Commodities Chan Foong Hin urged exporters to avoid engaging in deceptive practices. The government has tightened oversight, particularly in industries like rubber gloves, which are critical to Malaysia’s trade portfolio.

South Korea’s customs agency uncovered $20.81 million worth of country-of-origin violations in the first quarter of 2025, nearly matching the $34.8 million discovered in all of 2024. In response, South Korea created a specialized task force to address illegal exports.

CLICK HERE TO READ MORE FROM THE THE DUPREE REPORT

Trade groups in Malaysia also warned that origin washing could damage the country’s reputation as a trusted trade partner. The Airfreight Forwarders Association of Malaysia stated, “This practice jeopardizes Malaysia’s standing in the global supply chain.”

Broader Economic Implications

As Chinese exporters struggle to redirect goods originally intended for the U.S. market, the effects are rippling through both economies. The Chinese government has encouraged businesses to focus on local consumers to absorb excess inventory. However, this strategy risks worsening China’s deflationary cycle, with falling prices and reduced hiring.

In the U.S., analysts predict potential price increases and shortages if the trade conflict remains unresolved. The tariffs have already disrupted supply chains, and further delays in reaching a resolution could amplify these challenges.

Strategic Trade Tactics and Global Impact

Trade experts are debating whether these tariffs serve their intended purpose. Henry Gao, a trade analyst, noted on social media that while the tariffs may seem strategically crude, they could effectively deter transshipment practices. He suggested that imposing penalties on countries facilitating origin washing might discourage such behavior.

The international reaction to these measures highlights the delicate balance between enforcing trade rules and maintaining trust among global partners.

What’s Next?

If the U.S. and China fail to negotiate a deal, the economic impact could deepen, affecting businesses and consumers on both sides. Meanwhile, countries like Malaysia and South Korea face mounting pressure to curb fraudulent practices and safeguard their global reputations.

As the situation evolves, the stakes remain high for the global economy. Will stricter enforcement and negotiations bring stability, or will trade tensions escalate further?

Share your thoughts in the comments below and let us know how these developments might affect you. Don’t forget to share this article to keep the conversation going!

Follow The Dupree Report on WhatsApp here.

Freedom-Loving Beachwear by Red Beach Nation - Save 10% With Code RVM10