In the world of global trade, few terms have the covert glamour and historical baggage of ‘submarining’. Once a relic of the quota-era under the now-defunct Multi-Fiber Agreement (MFA) the controversial practice, is making waves again. Spurred by a new climate of protectionism and punitive tariffs—particularly those introduced during the Trump administration—this old trade trick is quietly regaining momentum, reshaping how garments make their way into the US market.

But this time, the game has evolved. The geography is different, the stakes are higher, and the players include not just foreign exporters but U.S.-based actors who’ve found clever ways to flip the script from within.

Submarining 101, rebirth of a trade hack

To grasp the gravity of this revival, we must return to the era of the MFA (1962-05), when garment imports into the US States were strictly controlled by country-specific quotas. Exporters, especially from big sourcing countries like China, faced caps on how much they could send to lucrative markets like the US. Submarining emerged as a workaround—ingenious and illegal.

Here’s how it worked: Chinese apparel was shipped to third countries—often in Africa—that weren’t subject to quotas. There, without any real processing, the goods were relabeled as originating from the intermediary country and re-exported to the US quota-free and sometimes duty-free. Everyone benefited: Chinese factories bypassed quota constraints, African traders earned tidy margins without making a single garment, and US importers stocked their shelves with high-demand items at lower prices.

This workaround netted billions before fading into obscurity with the MFA’s demise and the liberalization of global trade in 2005. But like all cycles, protectionism is back—and so is submarining.

A Trump-era aftershock

Fast forward to the late 2010s and early 2020s, under President Donald Trump’s administration, a slew of new tariffs and duties—especially targeting Chinese-made goods was unleashed in the name of protecting American industry. From solar panels to steel, and yes, to apparel, the US found itself reintroducing steep trade barriers.

These tariff walls, according to analysts, have rekindled the conditions for submarining to flourish once more. Only this time, the third-country detours are playing out across the Middle East, Western Asia, and parts of Southeast Asia—regions with preferential access to US markets or minimal exposure to the new duties.

What’s changed is not the method but the motive. In place of avoiding quotas, today’s submariners aim to dodge tariffs that can reach up to 25 per cent on certain Chinese goods. The garments are moved through countries like Jordan, Bangladesh, or even the UAE, where they are given a new paper trail and re-exported under different origin claims—sometimes with minor processing, other times with none at all.

Trump, for his part, responded with characteristic bluntness, threatening “serious action against the crooked and deceitful players who are undermining his quota regime.” But experts say the problem is not just overseas

The homeland twist, submarining on US soil

Data from 2024 adds a fresh, if unsettling, layer to the story: the US itself may be acting as a launchpad for its own brand of submarining.

Table: US garment trade 2024

Of the $6 billion in total US garment exports in 2024, more than half—$3.5 billion—were classified as re-exports, meaning the goods were imported into the US and then exported again without substantial transformation. This moved the US down to 18th in the world in net apparel exports, trailing countries like Egypt. Canada and Mexico—America’s key partners under the USMCA—absorbed $2.2 billion worth of these re-exports, mostly comprising garments that were originally imported from Asia.

The North American loop, a legal grey zone

Here’s how the domestic version of submarining unfolds:

Apparel imports from Asia enter the US—largely comprising basic but high-volume items like T-shirts and cotton pants. These goods are then re-exported to Canada or Mexico, capitalizing on duty-free benefits under USMCA. Back they come—often with minor tweaks or merely a change of documentation—to the US market under new origin status and free from the steep tariffs originally imposed on direct imports from Asia.

It’s a tidy legal loop that stretches the definition of “substantial transformation” but remains technically difficult to police. With tariffs pushing companies to seek creative trade routes, this US-based submarining is estimated to grow into a billion-dollar practice, piggybacking on loopholes in existing trade agreements.

More than just a trade trick

The economic implications are manifold. For starters, submarining erodes the effectiveness of trade policies meant to safeguard domestic manufacturing or pressurize geopolitical rivals. For compliant businesses, it introduces a competitive disadvantage, as they face higher landed costs while others game the system.

Ethically, it raises red flags over transparency. Consumers may believe they're buying a T-shirt ‘Made in Mexico’ when it’s effectively a Chinese product that’s played hopscotch across trade borders. “This is a test of regulatory will,” said a trade compliance expert on condition of anonymity. “Governments must decide whether they’ll clamp down on these practices or tacitly allow them to flourish because they keep supply chains stable and prices down.”

Regulation or reinvention

As trade tensions persist and more nations flirt with economic nationalism, the conditions for submarining are only likely to grow more favorable. Technology from AI-powered customs inspections to blockchain tracking is being explored as a countermeasure. But enforcement lags behind innovation.

The return of submarining marks more than a curious footnote in trade history—it’s a powerful indicator of how policy can drive both ingenuity and subversion in global commerce. Whether regulators crack down or turn a blind eye may well determine whether submarining stays submerged—or resurfaces as a defining force in 21st-century trade.