Donald Trump's tariff barriers turn out to be relatively easy to get around.

It has been almost nine years since Donald Trump began his first term as U.S. president. The rift between the United States and China has only escalated, violently shaking supply chains in Asia, "the world's factory."

Or maybe not so violently, as many companies have learned how to redirect their U.S.-bound exports to third countries to avoid high tariffs and stay connected to the U.S. market. Links in intricate supply chains have also found third countries from which to operate.

With the scramble to get Chinese products past Trump's tariffs and into the U.S. still ongoing, Nikkei investigated one of the hidden frontlines of trade improvisation between the world's two largest economies.

The investigation brought us to the northern Vietnamese city of Mong Cai, where at 7 one morning, large Vietnamese trucks are already forming long lines near the Bac Luan 2 Bridge border gate.

Many of the containers on the trucks feature Chinese characters. Drivers are taking empty containers to the border to return to China, where they will be loaded with cargo for another return trip to Viet Nam.

"I'm on standby to pick up containers from China at the border," a Vietnamese driver whose truck was parked near the bridge said.

"I've been told that I will deliver them to Cambodia."

Mong Cai has become a gateway not only for items from China but also for deliveries to Viet Nam's neighbors. A resident said a huge number of trucks gather here every morning before sunrise.

Mong Cai's cityscape betrays the city's newfound utility; it is dotted with restaurants whose signboards are written in Chinese.

Sign of the times: Many new restaurants and other shops in Mong Cai beckon customers in Chinese. 

Mong Cai owes its bustling remake to overheating U.S.-China trade tensions. Since Trump began his first term in 2017, Washington has introduced high tariffs on imports from China and restricted trade in other ways. But China has evaded the pressure and retained its access to the U.S. market by exporting via Viet Nam.

That's why the volume of containers passing through Mong Cai has been ballooning. Data compiled by the management committee of Bac Luan 2 Bridge shows that through July 6 this year, 840,000 tons of goods crossed the border, a 43% increase from the same period in 2024.

The data also shows the number of companies that went through export or import procedures at the bridge's border gate or nearby points rose by around 40% from last year to 1,351. Of these, 599 companies, or 40% of the total, were newly registered businesses.

The value of China's exports to Viet Nam in the face of high U.S. tariffs has surged, as have Viet Nam's exports to the U.S. Direct shipments from China to the U.S., meanwhile, have become stagnant.

Part of the increase in Vietnamese shipments to the U.S. is attributable to legitimate trade in which Viet Nam assembles parts and materials imported from China and exports finished products to the U.S. But illicit export deflection -- sending goods to a third country and misrepresenting their place of origin -- is rampant, and Washington is wary of the practice.

Dutch financial firm ING in July released a report that notes a rapid swelling of exports from China to Viet Nam and from Viet Nam to the U.S.

"While directly gauging the extent of transshipments is difficult," the report says, "the weakness in [Viet Nam's] manufacturing sector production despite robust export growth suggests limited domestic value-add."

The report adds that the expanding flow of goods from China to Viet Nam is not for processing work but for redirecting shipments to the U.S. "Key sectors showing strong signs of transshipments include machinery and equipment, computer and electrical products," it says.

Chinese exports' now circuitous route to the U.S. has turned Mong Cai into a key logistics hub. Central to the city's role is Bac Luan 2 Bridge, completed in September 2017, eight months after the first Trump administration was inaugurated.

Nikkei analyzed changes in the landscape near the bridge by using images provided by U.S. satellite imagery company Planet Labs.

Since the bridge's completion, logistics networks have been expanding as if to reflect the escalating tensions between Washington and Beijing.

An image taken in December 2017 shows few infrastructure projects in the border area.

But in a photo taken five years later, an expressway linking Bac Luan 2 Bridge with the Vietnamese capital Hanoi and the country's main marine shipment hub, Haiphong Port, can be clearly seen. The Van Don-Mong Cai Expressway, opened in 2022, shortened travel time from Mong Cai to Hanoi to three hours from five-and-a-half hours.

Bac Luan 2 Bridge has become a crucial link between the countries. Nikkei confirmed that a large logistics center (Area 1) was being built on the Chinese side. Land development had also progressed on the Vietnamese side to construct new communities (Areas 2 and 3).

The latest available image, taken in July, reveals further changes in the border area.

The logistics center in Area 1 has many more buildings, reflecting the growing transactions between the countries. There are notable changes in Areas 2 and 3 as well. The 50 hectares of Area 2 are being developed as Vera Diamond City, an upscale urban community with homes and shops.

Area 3 is called Vinhomes Golden Avenue. Nikkei traveled there and found that the area is attracting investors and being developed as a Chinese-style town.

Trump, whose tariff fusillades this spring sent shockwaves around the world, cannot tolerate the new China-Viet Nam transhipment route that has been expanding since his first term in office. As negotiations with America's trading partners continued, Washington took a tough stance toward Viet Nam, which it believes has tacitly approved China's rerouting of its exports to the U.S.

Vietnamese authorities promptly reacted. In the month or so from mid-May, they announced they had exposed 6,870 cases of fraudulent trade practices, including redirected exports from China and tax evasion.

The U.S. and Viet Nam struck a tariff deal in July, but it does not mean Washington trusts the Southeast Asian country. The Trump administration warns that it will slap a 40% punitive tariff on Viet Nam if exports from China and other countries to the U.S. are found to be rerouted through Viet Nam.

This puts the Vietnamese government in a tight spot, as it is next to impossible to grasp the full extent of redirected exports, in which Chinese companies falsify the consignor or place of origin.

A Nikkei investigation has found that multiple Chinese trading companies propose to their clients that they can avoid the U.S.'s high tariffs by first sending their U.S.-bound exports to Viet Nam.

International Trading Company A, headquartered in the Luohu district of Shenzhen, Guangdong province, says in its briefing material for clients that "re-exporting through a third country is effective to avoid high tariffs." Shenzhen is relatively close to Viet Nam, and Luohu is adjacent to Hong Kong.

The process is explained in Chinese. Cargo shipped from a port in China will be delivered to a port elsewhere in Asia, where it will be transferred to a waiting container. The cargo's place of origin is then changed from China to the country where the transfer takes place. The container is then put on a ship, and the cargo is brought to its final destination.

The U.S. imposes import tariffs on merchandise according to the listed country of origin. Company A says China-originating products can be shipped to third countries such as Viet Nam and Malaysia, where the products' country of origin is relabeled. Company A is believed to have secured the means to obtain certificates of origin issued by public organizations and other documents needed for export through its local offices or associates.

Trading Company B, based in Chaozhou, Guangdong province, tells its clients that "our partner agents will transfer your cargo into another container at a port in a third country. Papers needed to export to that country will be issued by our partner factory." This company urges clients not to leave any signs of transshipment, warning that packaging must not use Chinese characters or the phrase "Made in China."

Trading Company C in Shenzhen boasts that it provides photographic evidence of products going from one container to another in a third country. "In order to guarantee safety for your products, we take photos of your cargo being transferred to another container and provide you with the photos," it says in a document for customers.

Nikkei sent questions to these companies about redirected exports from China to the U.S. through Viet Nam. None of them replied by Nov. 17.

Further investigations into Chinese trading companies that propose and plan the redirection of exports have found that at least a dozen or so companies choose to transship through locations other than Viet Nam. Malaysia and Hong Kong are popular choices, as is Indonesia, suggesting that much of Southeast Asia is involved in redirecting Chinese goods to the U.S. and eluding Trump's tariffs.

Some of the trading companies mention Viet Nam as a transshipment location on their Chinese-language websites but not on their English pages.

Suspected redirection of exports can also be tracked by tracing container ships' movements.

Haiphong is about a two-hour expressway drive from Mong Cai. The city's port is one of Viet Nam's top shipping points for U.S.-bound cargo.

Nikkei's reporting team used MarineTraffic, a ship-tracking tool of Belgian research consultancy Kpler, to see how many container vessels from China make calls at Viet Nam's main ports, including Haiphong.

About 170 vessels made port calls in August, nearly double the figure for August 2021. The largest number of vessels left ports in Shenzhen and the Guangxi Zhuang Autonomous Region, both close to Mong Cai.

What do the increased Vietnamese port calls by Chinese container ships mean?

In July, Vietnamese customs authorities uncovered 899 cases of illegal marine shipments involving misrepresentations of place of origin and counterfeit items. Many of the vessels carrying illegal cargo made calls at Haiphong and other main ports. The authorities reported finding traces of cargo falsely labeled as having originated in Viet Nam being shipped to the U.S.

Trump's deep dislike of China-made products has been shaking Asia's supply chains ever since he first took office in 2017, with tech giant Apple being the most affected.

Based on publicly available data released by Apple, Nikkei found that 357 bases in China were manufacturing for Apple at the start of the first Trump administration. The most recent data, for 2023, shows 285.

The trend is unlikely to change. Taiwanese companies, including Foxconn, which manufactures most of the iPhone's parts, are expected to move more of their production bases out of China.

Few people around the world forecasted that one man would trigger the undoing of China's tightly knit supply chains. But many Chinese companies have built new supply chains in other parts of Asia to sidestep U.S. regulations and tariffs. Others are redirecting their U.S. exports through third countries, making the flow of goods less transparent and providing opportunities for illicit trade practices.

Why does Asia-made merchandise remain cheap despite high U.S. tariffs?

To answer this question, Nikkei investigated supply chains of Chinese products that exploit cheap labor in North Korea or ethnic Uyghurs in China, in addition to export redirection via Viet Nam.

It has been almost a decade since Trump widened the rift between the two economic superpowers, and in that time, it has become apparent that he has mostly succeeded in igniting a cat-and-mouse game: He introduces tariffs, and Chinese exporters go to work circumventing them.

Source: Nikkei Asia

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