In 2018, analyses suggest that the expansion of U.S. President Donald Trump's tariff bomb, which had been limited to certain items centered around China, to all items worldwide in the second phase was due to China's 'disguised exports.' Concerns have been raised that the United States may continue to crack down on China's tariff evasion tactics, prompting the need for Korean corporations to prepare for this.

Disguised exports refer to the act of exporting a specific product or its components to a third country for processing to avoid regulations and tariffs and then changing the origin before exporting it to the sanctioning country.

According to the Korea International Trade Association's International Trade and Commerce Research Institute on the 11th, Vietnam and Mexico are identified as the main transit points for China's tariff evasion exports. In 2019, China's exports to the United States via Vietnam surged 160% year-on-year (from $1.57 billion to $4.08 billion), while China's exports to the U.S. via Mexico increased 98%, from $5.3 billion in 2018 to $10.5 billion in 2022. Since the implementation of tariffs in 2018, the number of products that are partially made in China and finally produced in Vietnam and Mexico has increased.

An analysis suggests that the background for U.S. President Donald Trump's tariff imposition on countries around the world includes ‘diverted exports.’ Compared to 2017, just prior to the imposition of tariffs in Trump’s first term, China's exports to the U.S. via Vietnam and Mexico surged sharply. /Courtesy of Son Min-kyun

Vietnam and Mexico's dependence on Chinese imports has significantly increased. Before the Trump administration imposed tariffs on China in 2017, Vietnam's dependence on Chinese imports was 27.5%, which rose to 33.2% in 2021. Mexico's share of imports from China also rose from 17.6% to 20% during the same period.

During this period, the U.S. import ratio from China decreased by about 7%, while the import ratio from Vietnam and Mexico increased by 100% and 16%, respectively.

The United States is strengthening sanctions to prevent China's disguised exports. The U.S. Department of Commerce announced last December that it would impose preliminary anti-dumping tariffs of up to 271.2% on solar panels produced in four Southeast Asian countries: Vietnam, Malaysia, Cambodia, and Thailand. It determined that Chinese solar corporations were circumventing tariffs by moving wafers and cells produced in China to Southeast Asia to make modules before exporting them to the U.S. China's market share in the U.S. solar market is as high as 70%.

On the 9th, U.S. President Trump announces that the reciprocal tariffs imposed on countries worldwide will be suspended for 90 days, excluding China. /Courtesy of Reuters

However, the imposition of anti-dumping tariffs to prevent disguised exports takes a long time, which presents a weakness as it gives Chinese corporations time to respond. For this reason, it is analyzed that the Trump administration's second term imposed reciprocal tariffs on most countries, including allies.

The reciprocal tariff rate announced by Vietnam on the 2nd was 46%, which is nearly double compared to 25% in Korea and Japan. Mexico was among the first to have tariffs imposed in February due to issues related to illegal immigration and drug smuggling.

In response, Vietnam reportedly held an emergency meeting immediately after U.S. President Trump's tariff announcement and decided to crack down on China's disguised exports while strengthening controls on sensitive export items. According to Reuters, Vietnamese customs authorities are expected to crack down on disguised exports by the end of April, while likely trying not to provoke China during the process. On the 10th (local time), Vietnam and the U.S. agreed to engage in trade negotiations regarding tariffs.

Experts noted that the Trump administration's second term could also regulate China's disguised exports, so preparations should be made for this. Kim Nayul, a researcher at the International Trade and Commerce Research Institute, said, "It is essential to identify products with a high likelihood of disguised export regulations in advance and to be mindful of the origin when using intermediate goods."

On the 10th, containers are stacked at the export yard of Pyeongtaek Port in Pyeongtaek City. The U.S. suspended the reciprocal tariffs that went into effect against countries around the world on the 9th, but increased the reciprocal tariff rate against China to 125%. /Courtesy of News1

Kugibo, a professor at Soongsil University's Department of Global Trade, stated, "The tariffs are not solely due to disguised exports, but the high tariffs on Mexico and Vietnam show a strong intent. Mexican investment corporations should explore additional avenues in the Central and South American market, while corporations entering Vietnam should monitor negotiation trends and consider expanding to India and other areas."