Illegal Transshipment Reshapes Trade Risk in Latin America

Throughout 2025 and 2026, the tariff war between the United States and China stopped being a bilateral matter and became a force reorganizing global trade. When two economies of this size distort their trading rules, the effects do not stay between them: they spill over into third countries that, without seeking it, end up serving as a bridge. Latin America is one of those bridges. A recent White House report documents how more than 40 jurisdictions — several of them Latin American — have become nodes in what it calls the "Great Transshipment Scam" (White House Office of Trade and Manufacturing Policy [OTMP], 2026). In parallel, Strategos BIP's annual risk report describes how this same dynamic combines, in the region, with organized crime, illegal mining and institutional erosion (Buitrago Arias & Ruiz Galán, 2026). Read together, both documents allow a map of risk — and opportunity — to be drawn for the region's governments and companies.

Context: from Section 301 to the "Great Transshipment Scam"

This dynamic traces back to 2018, when the United States imposed Section 301 tariffs covering nearly 70% of Chinese exports. The immediate effect was a decline in the direct trade deficit with China; the medium-term effect was the so-called "Great Reallocation": Chinese exporters began routing goods through third countries via light assembly, relabeling, re-invoicing and paperwork changes that simulated a new origin (OTMP, 2026). The expansion of differentiated tariffs in 2025 deepened that incentive, since any low-tariff country can unintentionally become an entry platform to the U.S. market for Chinese-origin goods (OTMP, 2026).

The U.S. report classifies more than 40 countries into three tiers according to their role in that network: diversified scale leaders (including Mexico), scale leaders with significant economic integration with China, and small opportunistic targets — a category that includes Costa Rica, Panama, Colombia, Chile, Peru, the Dominican Republic and other countries in the region (OTMP, 2026). Estimates of the problem's size vary by methodology, from $40 billion a year calculated by Goldman Sachs to $303 billion estimated by Altana, with a central range near $75 billion (OTMP, 2026).

Analysis: two powers, one supply chain

It is useful to read this dispute not as an abstract tariff war, but as a struggle for control of a global supply chain in which China concentrates supply-side power and the United States concentrates demand-side power. Both powers use that leverage — economic, regulatory and, when necessary, political and military — to expand their influence beyond their borders. China responds to tariff pressure by diverting production to third countries and, caught in its own deflationary trap, channels manufacturing surpluses into Latin America at prices local industry cannot match (Buitrago Arias & Ruiz Galán, 2026). The United States, for its part, has turned access to its market into an explicit bargaining chip: the so-called Donroe Doctrine conditions bilateral relations with Latin American countries on curbing Asian illegal investment and trade, even influencing regional electoral cycles (Buitrago Arias & Ruiz Galán, 2026).

Latin America is thus caught between two power logics that were not designed with it in mind, yet use it as contested ground. Mexico illustrates both sides at once: it is simultaneously the main corridor for triangulating Chinese steel and aluminum into the United States and the country under the most direct pressure from Washington in the 2026 USMCA review (Buitrago Arias & Ruiz Galán, 2026). Peru's new Chancay port, and Panama's and Costa Rica's free-zone and maritime logistics infrastructure, show the same pattern at smaller scale: legitimate foreign-trade assets that, without sufficient controls, become attractive for transshipment (OTMP, 2026; Buitrago Arias & Ruiz Galán, 2026).

Implications for business, authorities and society

For companies, the risk is no longer just tariff compliance: it is reputational exposure, exposure to Office of Foreign Assets Control sanctions, and direct unfair competition in their own domestic markets. Strategos BIP's report documents extreme market capture by illegal networks — up to 90% of the cigarette market in Panama and 27% of the liquor market in Ecuador — figures that illustrate how large unfair competition can become when combined with trade-based money laundering (Buitrago Arias & Ruiz Galán, 2026). For authorities, the limitation is not only budgetary: in several countries in the region, the lack of ex officio powers prevents customs officials from seizing suspicious merchandise without a prior brand complaint, leaving a structural gap that illegal networks exploit easily (Buitrago Arias & Ruiz Galán, 2026).

On the U.S. side, the institutional response advances through the "Detective Border," a system integrating shipment data, routing histories, computer vision and production-capacity indicators to distinguish legitimate foreign investment from illicit transshipment (OTMP, 2026). That effort is reinforced by Executive Order 14411, which tightens bonding, ownership and good-standing requirements for importers of record (OTMP, 2026). For Latin American countries with export ambitions toward the United States, this means scrutiny over the true origin of their goods — legitimate or not — will keep increasing.

The opportunity: from transit ground to leverage

This scenario is not only a threat; it also opens an underused negotiating window. The Agreements on Reciprocal Trade the United States has promoted include, for the first time, clauses allowing a signatory to establish its own rules of origin to prevent the agreement's benefits from accruing to a third country (OTMP, 2026). A Latin American country that demonstrates real customs-control capacity can use that clause as leverage — not only to shield itself from transshipment accusations, but to negotiate better market-access terms in exchange for verifiable customs cooperation.

The same applies to local industries. Sectors hit by the "China flood" — footwear in Mexico, ceramics in Peru, e-mobility in Colombia (Buitrago Arias & Ruiz Galán, 2026) — have an underused tool in trade-defense mechanisms (antidumping investigations, countervailing measures, mirror tariffs) against the institutional slowness that characterizes them today. Speeding up those processes, and documenting them with forensic-grade evidence, turns an affected industry into an actor with real influence over its own government and trading partners.

Conclusions

Illegal transshipment is no longer a minor customs issue: it is the direct consequence of a geopolitical dispute between two powers that use trade as an extension of their power. Latin America appears in both reports analyzed here as transit territory, but also as the space where much of that dispute's outcome will be decided. Countries and companies that manage to turn compliance pressure — stricter customs controls, origin traceability, cooperation with CBP — into a competitive and negotiating advantage will be better positioned than those that simply absorb the risk.

Call to action

Companies exposed to supply chains with Asian nodes should map their origin risk with the same rigor now demanded of U.S. importers, and the region's customs authorities should prioritize updating their seizure and inspection powers before bilateral pressure turns that update into an externally imposed condition. At Strategos BIP and CIMA, we will keep monitoring this evolution with verifiable data, not speculative estimates.

References

Buitrago Arias, J. C., & Ruiz Galán, J. (2026). 10 riesgos de comercio ilegal en Latinoamérica (2026): El año del contrabando como efecto geopolítico. Strategos BIP. https://www.strategosbip.com/post/riesgos-comercio-ilegal-latinoamerica-2026

White House Office of Trade and Manufacturing Policy [OTMP]. (2026). The Great Transshipment Scam. The White House. https://www.whitehouse.gov/wp-content/uploads/2026/08/The-Great-Transshipment-Scam.pdf