Chinese exporters ‘wash’ product in third countries to avoid US tariffs

Good morning and welcome back to FirstFT Asia. In today’s newsletter:

• Australia’s Albanese wins a sweeping mandate

• The tricky task for Warren Buffett’s successor

• Cash-strapped Maldives to build $9bn blockchain hub

Chinese exporters are stepping up efforts to avoid tariffs imposed by US President Donald Trump by shipping their goods via third countries to conceal their true origin. Here’s what to know about the tariff workaround.

Origin-washing: Chinese social media platforms are flooded with adverts offering “place-of-origin washing”, while an inflow of goods from China has raised alarm in nearby countries wary of becoming staging posts for trade actually destined for the US. South Korea’s customs agency said last month it had found foreign products worth Won29.5bn ($21mn) with falsified countries of origin in the first quarter of this year, most of them coming from China and almost all destined for the US.

How exporters ‘wash’ products: The growing use of the tactic underlines exporters’ fears that new tariffs of up to 145 per cent imposed by Trump on Chinese goods will deprive them of access to one of their most important markets. “The tariff is too high,” said Sarah Ou, a salesperson at Baitai Lighting, an exporter based in the southern Chinese city of Zhongshan. “[But] we can sell the goods to neighbouring countries, and then the neighbouring countries sell them on to the United States, and it will reduce.”

Ou said that, like many Chinese manufacturers, Baitai shipped goods as “free on board”, under which buyers took liability for products once they left their departure port, reducing the legal risk for the exporter. “Customers only need to find ports in Guangzhou or Shenzhen, and as long as [the goods] go there, we have completed our mission . . . [after that] It’s none of our business,” she said. Read the full story.

• Huawei’s semiconductor ambitions: Satellite imagery obtained by the FT shows how the Chinese tech giant is building a production line for advanced chips in Shenzhen, as part of what analysts said was an “unprecedented effort to develop every part of the AI supply chain domestically”.

Here’s what else I’m keeping tabs on today:

Five more top stories

1. Australia’s Prime Minister Anthony Albanese is expected to take a bolder approach to foreign affairs and economic reform after scoring an unexpected landslide victory over the rightwing opposition party in the weekend’s election. It follows a similar result last week in Canada, where voters widely rejected that country’s rightwing party in a rebuke to Trump.

2. A Dubai-based family office has announced plans to invest $8.8bn to build a “blockchain and digital assets” financial hub in the Maldives, a scheme the cash-strapped Indian Ocean archipelago hopes will help it through a looming debt crunch. Moosa Zameer, the Maldives’ finance minister, said the country needed to “take the leap” to diversify away from tourism and fisheries.

3. Trump said he did not know if people in the US deserved due legal process, which is guaranteed by the American constitution, as he blasted the judiciary for thwarting his plans to deport undocumented immigrants. The comments came in a wide-ranging interview with NBC, in which Trump renewed his push to make Canada the 51st US state and insisted that he would not fire Federal Reserve chair Jay Powell. Read the full story.

4. Hard-right leader George Simion has won the first round of Romania’s presidential election, according to exit polls, and will face one of two pro-EU centrists in the run-off on May 18. The vote was rerun after the success of ultranationalist politician Călin Georgescu in the first-round ballot in November was annulled by the constitutional court over allegations of Russian interference.

5. Israeli Prime Minister Benjamin Netanyahu said yesterday that Israel would hit back against the Houthis and Iran after a missile fired by the Tehran-backed militants landed near Israel’s main international airport. The attack, which injured four people, came as Israel issued call-ups to thousands of reservists in preparation for ratcheting up its offensive in Gaza.

News in-depth

As 40,000 Berkshire Hathaway shareholders took to their feet in Omaha on Saturday in a standing ovation for Warren Buffett, Greg Abel was among those applauding the career of the world’s greatest investor. By the time they gather for next year’s annual meeting their eyes will be fixed on Abel, Buffett’s handpicked successor, who will be scrutinised in a way “the Oracle of Omaha” has largely avoided in recent years. Here’s more on the “impossible” task of replacing Buffett.

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