The real reason that tariffs aren't causing inflation isn't because domestic firms are eating the costs or foreign firms are paying them, it's fraud.
Flexport CEO Ryan Petersen this week explained just how easy it is to bypass tariffs. He said there is a "massive fraud" in shipping right now that is "very rampant"
"The way it works: the US is the only country that allows foreign companies to import goods into the country, with no legal entity, no requirement to have an employee locally. You can just import stuff into the country as a foreign company. And then you just lie on your declarations."
He notes that customs agents are set up for anti-narcotics and there is no real enforcement or inspection of tariffs.
"These companies just cheat and there's basically no consequence," Petersen.
The easiest way to do it is simply to lie about the value of goods. You can say they're worth $200,000 instead of $3 million and no one inspects it. If they are caught, they can just spin up another foreign corporate entity.
He went through manifests and he said about 10-11% of all US imports were switched to listing the foreign factories as the importers from the domestic importer previously and it's growing rapidly. He noted that 60% of sellers on Amazon are non-resident importers.
