Key Takeaways:
The White House is betting artificial intelligence can close a $75 billion hole in US tariff enforcement.
The Trump administration is deploying an AI-powered "detective border" to intercept an estimated $75 billion in goods illegally transshipped through third countries to evade US tariffs on China, a White House report released Thursday showed.
"China's biggest enablers range from Mexico and Canada on US land borders to the European Union, India, Japan, and South Korea," the report from White House trade adviser Peter Navarro's office said, naming more than 40 countries at elevated risk of serving as rerouting hubs.
AI supply chain firm Exiger put the mid-range value of illegally transshipped goods at $75 billion between February 2025 and February 2026, corresponding to lost tariff revenue of $19 billion to $34 billion. Other countries flagged include Indonesia, Thailand, Brazil and Malaysia, with the report citing cheap labor, strategic port access, lax customs enforcement and free trade zones as exploitable weak links.
The enforcement push comes as tariff differentials widen the incentive to reroute goods, with tens of billions of dollars in country-specific duties hitting compliant importers hardest. The report said the "spoils of illegal transshipment also enrich the transshipping countries themselves," capturing assembly fees, warehousing revenue, port charges and export-processing-zone investment.
The trend predates the current administration. When Trump imposed high tariffs on Chinese exports in his first term, many businesses adopted a "China +1" strategy, shifting some manufacturing to Vietnam, Cambodia and other countries, often through Chinese-owned factories. The current wave of country-specific duties has sharpened that arbitrage, and the report acknowledges the differentials can increase the incentive to reroute goods.
The "detective border" tools will scan shipment data against routing histories, confirm production capacity and ownership relationships, and analyze packaging patterns and X-ray imaging at ports to detect mismatches between declared and actual container contents. US trade enforcement authorities have for decades concentrated limited resources on cases with the biggest payout potential, and such cases often take years to build, meaning illicit goods keep flowing into the US market at below fair-market prices.
Illegal transshipment is notoriously hard to detect, and determining country of origin grows more complex as imports are assembled from components manufactured in multiple countries. "Effective enforcement therefore requires distinguishing legitimate manufacturing and substantial transformation from pass-through trade and origin shifting," the report said. It remains unclear how much of the supply chain shift reflects illicit activity rather than legitimate changes to global production, with the estimates drawing on two government and three private-sector sources.
The stakes extend beyond tariff revenue. If the AI tools work, they could redirect billions in trade flows and pressure the transshipment hubs that have captured assembly fees, warehousing revenue and logistics margins. If they fall short, the US risks continued erosion of its tariff regime as exporters route around it, undermining the leverage Washington has built into its trade policy toward Beijing and the allies that enable the rerouting.
This article is for informational purposes only and does not constitute investment advice.
