Chinese Exporters Look to Go ‘Gray’ to Circumvent Trump Tariffs

The ongoing trade war initiated by U.S. President Donald Trump against China has intensified, fueling concerns over its impact on global trade and the rise of "gray trade chains" as exporters seek ways to bypass tariffs. One method involves rerouting Chinese goods through third-party countries, such as Turkey, to benefit from the comparatively lower 10% tariff imposed during a recent 90-day reprieve from higher tariffs [para. 1][para. 3]. These third countries are part of a broader strategy to mitigate the effects of U.S. tariffs.

Trump recently announced a temporary 90-day pause in tariff hikes on dozens of trading partners, maintaining the baseline 10% tariff rate on these countries. However, in retaliation for China raising levies on U.S. imports to 84% from a previous 34%, Trump imposed additional tariffs on Chinese imports, elevating them to as high as 125% [para. 2]. Since taking office, Trump has levied three rounds of tariffs against Chinese goods, including two separate 10% hikes [para. 2].

The 90-day pause has increased interest in circumventing tariffs by "washing and changing labels" on Chinese-made products at ports. For instance, Turkish traders are reportedly considering transshipment options via Turkish ports to the U.S. during this reprieve. While these methods raise transportation costs, traders believe the profit margin from the tax differential will make the effort worthwhile [para. 3][para. 4]. Additionally, gray market activities such as "gray customs clearance," where some clearance companies exploit connections to government officials to lower duty payments, are expected to rise [para. 6].

The trade war is already having an impact on freight logistics. Shipping companies are cutting capacity on U.S.-China routes due to plummeting container freight rates, which fell by 18% in the past week, according to the Ningbo Shipping Exchange’s Containerized Freight Index [para. 8]. Some customers have even halted or recalled shipments to the U.S., resulting in "ghost containers" and increased global shipping route disruptions. Many have diverted goods to other regions like Europe and Asia, adding chaos to the trade environment [para. 9].

Trump, addressing the trade war during a cabinet meeting, expressed optimism about a potential deal with China but warned that tariffs could be reinstated at higher levels if negotiations fail after the 90-day period. While he left the door open to extending the pause, it remains uncertain how the situation will evolve [para. 10].

Adding to the turmoil, the U.S. Customs and Border Protection (CBP) experienced a system malfunction that complicated operations for goods already en route. For 10 hours, CBP’s Automated Commercial Environment system failed to process the newly introduced tariff exemption codes for shipments in transit. This glitch magnified the challenges importers face, as U.S. customs already struggles to manage the increased workload brought on by verifying product origin, classification, and value [para. 12][para. 14].

The escalation of tariffs and the corresponding technical challenges underscore the deepening complexity of global supply chains. Analysts highlight that the rapid shifts in tariff policy have outpaced the capacity of systems like the CBP’s to adapt, adding another layer of disruption to an already fragile trading environment [para. 15]. The trade war's economic and logistical impact continues to ripple across markets, reshaping global trade patterns and heightening uncertainty for exporters and importers alike [para. 16].