Published on Aug 21, 2025
President Donald Trump is pondering an executive order to define the percentage of content from high-tariff countries in imported goods that would trigger his recently announced 40% ‘transshipment’ tariffs, three sources familiar with the matter said.
The administration on July 31 said it would apply an additional 40% tariff on ‘transshipped goods,’ or goods shipped through a third country to secure lower tariff rates. But the percentage of non-local content necessary to trigger that additional penalty has remained unclear.
The order would clarify that question, the sources said. “Current thinking would be that less than 50% local content” would trigger the transshipment tariff, one of the sources said.
A second source said the White House is considering an approach consisting of two elements: “You have to have more than x percentage of ‘good content’ and less than x percentage of ‘bad content,’” to avoid the additional 40% tariff, the source said.
Under this approach, ‘good content’ would include local content and content from low-tariff jurisdictions, while ‘bad content’ would include inputs from China and other high-tariff jurisdictions, the source said.
The administration expects to release the order as soon as next week, one of the sources said. But the timing and its exact terms remain in flux, the sources added.
The administration would implement the tariffs under the International Emergency Economic Powers Act (IEEPA), the sources said. The administration’s use of IEEPA is currently being challenged in court.
The transshipment tariff is viewed as an attempt to combat the trend of companies moving manufacturing out of China to countries with lower tariff rates while still relying on Chinese inputs—in the words of the July 31 order, goods “transshipped to evade applicable duties.”
The administration has been debating what percentage of non-local value would subject a good to the tariffs, one of the sources said. Staff at Treasury and Commerce have been pushing for the tariff to apply only to goods with 70% non-local content, one of the sources said.
Others in the administration have pushed for a lower number. Commerce Secretary Howard Lutnick suggested last week that the administration would apply the tariffs to any item with 30% of the value coming from high-tariff countries.
Regardless of where the president lands, an updated order would significantly affect global supply chains, experts said.
“This affects so many industries and so many importers. It would have a substantial impact on supply chains and sourcing,” said David Stepp, a partner in the international trade practice at Crowell & Moring.
Textiles, consumer electronics, industrial electronics, and automobile parts would all be particularly affected by the executive order, said Stepp. Current standards in these sectors allow for exports to the U.S. to include a high percentage of value from places like China without being subject to Chinese tariffs, Stepp added.
The Department of the Treasury, the Department of Commerce, the United States Trade Representative, and the White House did not respond to a request for comment.
