$112B Cargo Gap Signals Record Tariff Evasion Pressure

Key takeaways

Trade data shows a $112 billion gap between what China reports exporting to the US and what US Customs records as arriving.
The discrepancy suggests up to ~25% of Chinese shipments may be slipping outside full tariff capture.
Aggressive “Delivered Duty Paid” (DDP) shipping offers and shell importers are central tactics.
Enforcement is constrained by jurisdictional limits and resource reallocation within DHS.

What’s Driving the Gap

The divergence between Chinese export figures and US import data has widened sharply relative to Trump’s first-term trade war. Federal Reserve research previously estimated that nearly two-thirds of similar gaps were attributable to tariff evasion, with other factors (e.g., tax rebate timing) contributing.

Today’s steeper tariff regime appears to have incentivized more sophisticated evasion models, including:

Undervaluation or misclassification of goods to reduce assessed duties.
Use of non-resident importers or shell companies that dissolve if investigated.
Suspicious “all-in” freight offers priced per kilogram — despite tariffs being calculated on declared value, not weight.

Competitive Distortion

Law-abiding importers report being undercut by competitors allegedly using aggressive logistics schemes. Offers promising 40–50% cost reductions imply duties may not be fully paid.

The distortion creates a two-tier market:

Compliant firms absorbing full tariff costs.
Alleged evaders passing savings into pricing power.

Even if courts invalidate some tariffs, competitive imbalance persists where enforcement lags.

Policy & Enforcement Response

Authorities have launched:

An interagency trade fraud task force.
A whistleblower program.
AI-powered monitoring systems for supply chain anomalies.

However:

Shell importers are difficult to trace or penalize once dissolved.
US agencies face jurisdictional limits when actors operate abroad.
Resource shifts within DHS have constrained trade enforcement capacity.

Legislative proposals under consideration include:

Tightening requirements for non-resident importers.
Eliminating the “first sale” rule, which critics argue facilitates undervaluation.

Macro Implications

If the $112B gap materially reflects evasion:

Effective tariff rates may be lower than statutory levels.
Domestic manufacturing incentives weaken.
Trade policy credibility erodes.
Compliant US firms bear disproportionate compliance costs.

The enforcement lag suggests tariff effectiveness is increasingly dependent not on rate levels, but on administrative capacity and cross-border accountability mechanisms.

Source