China's Rerouting Boom: How Major Firms Are Bypassing US Tariffs Impact

While news of a trade deal struck between the United States and China will be welcome news for global trade, firms are continuing to seek out creative solutions in minimizing export costs when it comes to shipping goods. The announcement of the Trump administration's reciprocal tariffs in April 2025 sent shockwaves throughout China, the world's largest exporter of goods. In 2024, China's total exports reached a value of $3.58 billion, representing a scale that eclipses second place United States by more than $1.5 billion. The prolific rate of exporting in China is such that the Southeast Asian nation's trade surplus with the world surpassed $1 trillion for the first time this year, with forecasts suggesting that it could climb to a total of $1.23 trillion by the end of 2025. Despite China's strengthening rate of exports, concerns still remain throughout different sectors domestically that heightened US trade tariffs and an uncertain political landscape could weaken profit margins in the future. The economic recovery of China is likely to be protracted as the government continues to roll out stimulus packages to support growth, and more companies are using trade challenges to seek out opportunities through rerouting goods. Solving Tariff Challenges Although the announcement of a trade deal between the United States and China saw President Trump's ‘Liberation Day' tariff fall to 10%, research from Oxford Economics has determined the effective tariff rate on Chinese goods entering the US at 29.3% in November 2025. While this represents a welcome climbdown from the 37.1% rate prior to the trade agreement, it will still be a source of financial strain for exporters. Notably, steel and aluminum products and their derivatives remain at 50%, as does copper. Other goods like inorganic chemicals and animal and vegetable products face a 25% levee in addition to base rate tariffs. These challenges are causing exporters to bypass US tariffs by rerouting shipments through third countries, which helps to mask the origin of their goods, opening the door to considerably lower tariff rates. Major Chinese firms are actively looking to nations like Malaysia as a rerouting option to ship goods, where a new certificate of origin can be issued before products are sent on to the United States. Malaysia is proving to be a popular destination for export rerouting among Chinese firms because the Trump administration lowered its base tariff rate from 25% to 19% in July. Critically, many Malaysian exports, including semiconductors, steel, pharmaceuticals, critical minerals, aluminum, automobiles, copper, consumer electronics, lumber, and polysilicon are exempt from any tariffs. "Rerouting exports is a grey trade practice for Chinese firms seeking to recapture efficiency when it comes to exporting to the United States," explained Iván Marchena, Senior Economist at global brokerage brand Just2Trade. "During the earlier trade war between China and the United States during Trump's first presidency, we saw trade between the two nations drop off while US imports from Vietnam and Mexico increased. This level of resilience is a strong indication that leading Chinese firms and stocks are adaptable enough to secure growth in hostile trade environments." Rerouting in Action China's proficiency in artificial intelligence is such that Silicon Valley companies like AirBnb are reportedly favoring the cost-effective models created by Southeast Asian innovators over their more costly US counterparts. While China is becoming a global leader in the distribution of AI models globally, it's also emerging as a key manufacturer of components such as semiconductors and electronics that can support the emergence of artificial intelligence. Given that the US is still placing high tariffs on imports of metals from China, Malaysia is serving as a key destination for rerouting to bypass trade levees. Critically, Malaysia's tariff exemption on semiconductors and various metals has drawn in rerouting interest from China. According to Loo Lee Lian, CEO of state government investment promotion agency, InvestPenang, more than 350 foreign-invested companies have established their operations in Penang, with a particular focus on semiconductor and electronics sectors. More than 50 of those that arrived in Malaysia last year were originally from China. This figure is likely to have increased further since the announcement of the Trump administration's Liberation Day tariffs. The Changing Shape of Supply Chains The rerouting phenomenon is not only transforming the beginning of the supply chain for Chinese firms but also the destinations on the other side of the Pacific Ocean. Chinese intermediate goods used in manufacturing can seek to bypass US tariffs by heading to Canada and Mexico first. Legally, imports to these nations that subsequently undergo a substantial transformation and lead to the production of new goods are considered as made in that country when exported, helping to pave the way for products to enter the United States under USMCA zero tariffs or at the WTO MFN tariff rate, repenting on regulatory requirements. Trade in the Age of Reciprocal Tariffs While a trade deal has helped to cool relations between the United States and China, there are still plenty of major exporters in Asia that are wary of the economic hit that comes with directly sending goods to the United States. Although the rules surrounding rerouting can be clouded at best, they point to the level of resilience that major Chinese manufacturers have become accustomed to using to continue benefiting from their status as the world's largest exporters. Given their ability to adapt to the changing geopolitical climate, it's likely that China's trade surplus will only grow into 2026. Disclosure: On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer. Dmytro Spilka does not intend to make a trade in any of the securities mentioned above in the next 72 hours. Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.