President Donald Trump’s onslaught of tariffs was initially meant to grow government revenue. However, they may have inadvertently enabled a multi-billion dollar tax scheme for the U.S. economy: Companies have found tactics to evade the sky-high tariffs and are engaging in fraud that could have dire consequences for the country, including lowered federal tax revenues and reduced GDP.
The White House is now cracking down on these tariff dodgers. In a report on Tuesday, the administration chronicled the magnitude of the problem and outlined how it’s trying to curb it. It claimed the U.S. is losing between $19 billion to $26 billion in tax revenue annually as a result of countries routing exports through other countries in order to evade levies, in a process called transshipment.
But the true extent of the tariff fraud may be even greater than that. Last year, data from China’s General Administration of Customs and U.S. Census Bureau showed a $112 billion gap between what China reported shipping to the States and what the U.S. reported receiving—suggesting efforts to evade these taxes are ballooning even beyond the tens of billions of dollars outlined by the Trump administration.
China appears to be the main culprit behind the tariff dodging, processing exports through more than 40 other countries, according to the report. But it’s not the only one to receive the White House’s attention: The report also pointed to dozens of other nations turning a blind eye to shell importers and foreign importers behind tariff fraud.
