Washing Away the US: Tariff Evasion Under China’s Retaliatory Tariffs

This paper examines tariff evasion in response to China’s origin-specific retaliatory tariffs on US imports during the US-China trade war. Using bilateral trade data at the HS 6-digit product level, we document increasing divergences between US-reported exports to China and China-reported imports from the US following the tariff shock, consistent with intensified tariff evasion. We provide novel evidence on a previously underexplored channel of tariff evasion: misreporting the country of origin to exploit differential tariff treatment across origins. This channel requires two enabling conditions: transit plausibility through third-country hubs located along existing US–China maritime routes and pre-trade-war China-third country trade flows that provide statistical cover for relabeled US products. This paper also finds evidence of tariff evasion through quantity underreporting and product misclassification, while price underreporting has no significant effects. Finally, only China’s statutory tariff exclusions substantially attenuate tariff evasion, whereas the market-based tariff exclusions have no significant effect.