According to a senior researcher at ANBOUND, China's foreign trade is currently shifting from an " export-oriented " strategy to a " re-export " one. This change is driven by the pressure of high U.S. tariffs and the temporary 90-day tariff exemption the U.S. has granted to 75 other countries, before the U.S.-China trade talks in Geneva.

On May 9, China's General Administration of Customs announced that in April, exports grew by 8.1% year-on-year, down from 12.4% in the previous month. Meanwhile, imports fell by 0.2%, compared to a 4.3% decline previously. The trade surplus stood at USD 96.18 billion, down from USD 102.64 billion. Additionally, China's direct exports to the U.S. in April plunged 21% year-on-year, with their share dropping to a historic low of 10.5%. In contrast, exports through intermediary markets such as ASEAN and Latin America surged significantly. Notably, exports to ASEAN rose by 20.8% year-on-year to a record high of USD 60.4 billion, accounting for 19.1% of total exports. Re-exports to the U.S. via key hubs like Vietnam, Thailand, and Indonesia also soared. In terms of maritime shipping, as of the end of April, the number of container ships sailing directly from China to the U.S. had dropped by 33.8% compared to April 9, when reciprocal tariffs were implemented. At the same time, China's overall exports remained relatively stable. Although both the deadweight tonnage of departing ships from the 20 major ports and the cargo throughput at key monitored ports initially declined after the tariffs took effect, they quickly rebounded, reaching levels higher than before the tariffs were implemented. These data points collectively indicate that Chinese enterprises have clearly engaged in short-term "re-export" activities to mitigate the impact of the tariffs.

Re-export trade is an important form of international trade and a key link in the operation of the global trade system. It plays a unique role in optimizing resource allocation and promoting the process of economic globalization. Re-export trade refers to a situation where the trade contract for goods is not directly signed between the producing country and the consuming country. Instead, it is signed separately by the producing country and the consuming country with a transit country, and the delivery is completed in the transit country. In other words, the trade process involves a "transit" in the transit country.

Re-export trade typically takes two forms: First, for finished products, goods are stored, classified, repackaged, or undergo similar operations in the transit country’s ports or bonded warehouses without altering their form, use, or customs code, which is common for labor-intensive items like textiles, clothing, furniture, and toys. Second, for raw materials or intermediate goods, substantial value-added processes such as processing and assembly are carried out in the transit country, resulting in changes to the product’s name, characteristics, or use, along with corresponding adjustments to the customs code. This model is common for technology-intensive industries like mobile phones and automobiles, where core components may come from China, but final assembly happens in places like ASEAN countries or Mexico.

However, the key to the successful implementation of re-export trade lies in the rules of origin, which refer to the specific standards set by each country or international agreement to determine the country where goods are manufactured, produced, or substantially processed. Under the current U.S. reciprocal tariff policy framework, if a product exported through re-export trade is still deemed to originate from China, it cannot avoid the impact of tariffs, making the determination of origin crucial. The U.S. Customs and Border Protection (CBP) defines the "country of origin" based on federal regulations, which refer to the country of manufacture, production, or substantial transformation of the goods, requiring the transit country to carry out processing that sufficiently alters the product’s name, characteristics, or use. At the same time, under the WTO rules of origin agreement, the U.S. classifies origin rules into preferential origin rules applicable to members with which the U.S. has signed free trade agreements, including the USMCA, and non-preferential origin rules applicable to most-favored-nation status or normal trade, as well as government procurement.

It should be noted that China’s shift from “export” to “re-export” is essentially a passive adjustment in response to U.S. trade barriers, but there are some risks behind this trend.

One risk is the rules of origin. Countries like Vietnam and Mexico have not only strengthened the scrutiny of certificates of origin, but the U.S. has also implemented AI inspection systems to trace supply chain data at the third-tier level. If companies merely alter labels or conduct minimal processing to obtain certificates of origin, they could be deemed as engaging in trade fraud, leading to goods being detained, hefty fines, or even legal consequences. According to media reports, the Korea Customs Service recently announced it had seized illegal re-exported goods worth KRW 29.5 billion in the first quarter, most of which were Chinese goods. These products, originally "Made in China", were transformed into "Made in Korea" once they arrived in South Korea. It is reported that 97% of these illegally re-exported goods were destined for the U.S., a significant increase compared to 62% last year. South Korean authorities believe this situation is closely linked to the aggressive tariff policies of the Trump administration.

The second risk is that the policy window is short and highly dependent. The U.S. tariff exemption time frame for transit countries, like the 90-day observation period, is highly uncertain, and countries like Mexico and Thailand frequently adjust their rules of origin. Once companies commit to a specific re-export route, sudden policy changes could lead to supply chain disruptions. For instance, the Trump administration's previous threat to dismantle the USMCA forced companies to reevaluate their re-export strategies through Mexico.

The third risk is that the price war is unsustainable. Currently, companies are generally lowering prices to compete for re-export orders, with some product prices dropping by more than 15%, compressing profit margins to a critical point. This not only weakens the profitability of the industry but also triggers a vicious cycle. Dumping products at low prices could lead to anti-dumping investigations. For example, after the European Union imposed tariffs on Chinese electric vehicles, countries like Brazil and South Africa followed suit with higher tariffs, further squeezing market space.

The fourth risk is the issue of industrial hollowing-out. The large-scale relocation of labor-intensive industries to Southeast Asia has led to the disruption of supporting industrial chains in Chinese regions like the Pearl River Delta. Transit countries have limited processing capacity and are unable to handle the entire industrial chain, creating an "industrial transfer trap". This means China loses its advantage in mid- to low-end manufacturing without achieving breakthroughs in high-end technologies, which in turn exacerbates the vulnerability of the supply chain.

The fifth risk is that re-export trade increases the trade surplus of transit countries with the U.S., triggering targeted measures from the U.S. In April 2025, the U.S. imposed tariffs of up to 3,521% on solar products from Vietnam, Thailand, and other countries, directly targeting goods that were re-exported through Southeast Asia from China. Additionally, the U.S. Treasury Department has placed Vietnam on its currency manipulation watchlist, intensifying scrutiny of its trade practices. The U.S. may also investigate specific goods from countries like South Korea, Thailand, and others for trade imbalances. If violations of re-export trade rules are found, the U.S. is likely to impose punitive measures such as additional tariffs to uphold its claim of "fair trade".

It is worth mentioning that the U.S. and China have launched the first round of negotiations in Switzerland and achieved some preliminary results. While this will temporarily ease the trade war situation, the tariff negotiations themselves are still full of uncertainties. Between 2018 and 2019, China and the U.S. held 11 rounds of talks, during which negotiations broke down at one point, leading to a new wave of tariff increases. Therefore, this round of negotiations may also go through a tortuous process. Regarding the export situation in May, there are two key issues to watch. First, some products have resumed shipments to the U.S., especially some manufacturers in Jiangsu and Zhejiang who have received notifications from U.S. retailers like Walmart, urging them to resume shipments quickly. Second, the sustainability of "re-exporting" can be monitored by tracking port container throughput. In addition to continuing to pay attention to the re-export trend, it is important to closely observe whether production has slowed down compared to the first quarter. As the tariff negotiations shift from pricing expectations to pricing realities, the underlying production conditions will become a key factor in determining future trade trends.

Final analysis conclusion:

China's shift from "exporting" to "re-exporting" is a rapid adaptation to external trade environment pressures. The U.S.'s high tariff policy has forced China to find alternative routes to bypass these barriers, with re-export trade becoming a flexible countermeasure. However, this strategy is not without risks. The strict scrutiny of rules of origin and the frequent adjustments to the U.S. tariff exemption period for transit countries will increase policy uncertainty for businesses. Overall, China's "re-exporting" strategy can effectively mitigate tariff pressure in the short term, but in the long run, it is essential to manage risks and promote industrial upgrading in order to maintain sufficient competitiveness in the U.S.-China trade game.