China is exploiting loopholes to avoid billions in US tariffs, with phantom importers and suspiciously cheap shipping deals driving a record trade fraud surge that burdens legitimate American businesses. Bloomberg Markets reports this evasion scheme cost the US economy an estimated $112 billion in lost revenue last year, forcing compliant companies to absorb higher costs while China gains competitive advantages.

The fraud involves shell companies routing goods through third countries to exploit tariff classification errors and misdeclared shipping costs, creating a shadow trade network that undermines fair competition and tax systems. Experts warn this trend could escalate if regulators fail to implement stricter verification protocols for international cargo flows, potentially prompting retaliatory measures from Washington as policymakers scramble to protect domestic industries from predatory trade practices.