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Tariff Cheats Surge: US Businesses Suffer
25 Feb
Summary
- Record $112 billion gap in US-China trade data suggests massive tariff evasion.
- Companies face existential threats from competitors bypassing steep trade barriers.
- US Customs faces challenges due to shell companies and resource redirection.
Record levels of tariff fraud are significantly impacting US businesses, with a staggering $112 billion discrepancy in US-China trade data indicating widespread evasion of duties. This surge in illicit schemes, driven by aggressive Chinese logistics and high tariffs, threatens compliant companies by allowing competitors to bypass trade barriers. Firms are experiencing existential threats as rivals underprice goods, eroding market share and hindering efforts to bring manufacturing back to the US.
Methods of evasion include underreporting goods' value and misclassifying them to secure lower tariff rates, often facilitated by shell companies acting as importers of record. These entities can be rapidly established and difficult for authorities to track. Compounding the issue, resources within the Department of Homeland Security have been redirected from global trade crime investigations to immigration enforcement, diminishing the capacity to combat sophisticated fraud schemes.
US Customs and Border Protection is aware of these tactics and has stated it is intensifying enforcement. Initiatives like an interagency trade fraud task force and an AI-powered monitoring system were launched in August 2025. However, authorities face limitations in pursuing shell companies that vanish or criminals operating abroad. The lengthy investigation process for detected violations further exacerbates the problem, leaving compliant US companies bearing the brunt of enforcement efforts.
