Inside China’s Tariff-Dodging Scheme That Kills Its Competition

In 2016, the U.S.-China trade war forced Beijing to negotiate. Tariffs crippled Chinese factories, major U.S. retailers like Walmart and Costco halted orders, and container shipments stalled. China conceded. But in 2025, when the U.S. imposed a 145 percent tariff expecting similar results, Beijing didn’t flinch. There was no panic, no economic distress, no concessions. Why? Because China had a secret card this time.

Over the past decade, China has built a decentralized export machine: more than 1 million cross-border e-commerce companies shipping directly to U.S. consumers via platforms like Amazon, Temu, and Shein. This army bypasses traditional retail channels, pays no income taxes, evades tariffs, and undercuts American businesses. Here’s how they do it — and why tariffs alone can’t stop them.

How They Game the System

Unlike in 2016, Chinese sellers no longer rely on U.S. retailers’ purchase orders. They ship container loads of goods directly to consumers, systematically undervaluing them on customs declarations.

Chinese e-commerce companies exploit U.S. customs through sophisticated tactics centered on non-resident importer (NRI) structures and delivered duty paid (DDP) clearance. These methods, often facilitated by logistics firms and customs brokers, shield sellers’ identities and minimize duties.

Here’s how it works: Brokers register NRI entities and post bonds for Chinese sellers, clearing goods and delivering them to Amazon fulfillment warehouses. They declare low container values to avoid scrutiny and sometimes misclassify goods as other items to secure a lower tariff rate. Many brokers are Amazon-affiliated (SPN, Send, Ship Track). Platforms like AMZ123.com list hundreds of such providers. Large sellers register multiple NRIs, splitting shipments among them. If one NRI is flagged, only that bond is lost — a minor business expense.

These tactics let Chinese sellers sidestep tariffs, keep prices low, and dominate visibility. As tariffs rise, so does their competitive edge.

A Tale of Two Importers

Consider what this looks like practically.

If Company A, a U.S. importer, buys a $10 product at a 10 percent tariff, it would pay a $1 duty, for a total cost of $11. At a 145 percent tariff, it would pay a $14.50 duty, for a total cost of $24.50.

If Company B, a Chinese seller, falsely declares the same $10 item as $1, at a 10 percent tariff, it would pay $0.10, for a total of $10.10. At a 145 percent tariff, it would pay $1.45, for a total of $11.45.

Company B also avoids U.S. corporate taxes by funneling profits offshore. Company A pays full tax. This isn’t just an advantage, it’s economic warfare.

This system devastates U.S. businesses. Retailers lose pricing power. Jobs in fulfillment, marketing, and customer service move offshore. Federal and state governments lose significant tax and tariff revenue. Small and mid-sized brands are crushed.

In May 2025, the Trump administration ended the $800 de minimis exemption. It disrupted small-parcel shippers, but major exporters weren’t affected. They had already switched to container loads. Their real edge isn’t de minimis; it’s systemic undervaluation and offshore profit laundering.

Proof in Plain Sight

If Chinese sellers paid 145 percent tariffs, prices would have doubled. They didn’t. Price-tracking sites like camelcamelcamel.com and keepa.com show that Chinese-made goods, such as textiles, gadgets, and pet products, still sell for $10–$20. They’re relatively unchanged.

And despite tariffs, China’s outbound container volume dropped only 35 percent in 2025, not the 80 percent collapse many expected. That’s because e-commerce exporters kept shipping and kept cheating.

How to Shut Down the Trojan Horse

To fix these problems, the United States must focus its reforms on closing these operational loopholes.

First, it should require all sellers on U.S. platforms to have a U.S.-registered entity, employer identification number, address, and bank account. Platforms must enforce real-name KYC, or “know your customer.”

Second, customs declarations should use platforms’ SKU-level sales data. Declared value must be at least 30–35 percent of the normal retail price. Deviations over 70 percent should trigger AI-driven Customs and Border Protection audits.

Third, the United States should ban NRI and DDP structures that obscure seller identity and require sellers to be the true importer of record.

Without these changes, tariffs will keep punishing honest American companies while rewarding tax dodgers abroad.

This isn’t globalization. It’s industrialized loopholes. Until the United States shuts them down, China’s Trojan horse will keep rolling through America’s gates.

For more in-depth evidence, detailed case studies, and future podcast and video content, visit digitaltrojanhorse.com.

Tim Odell is a seasoned merchant with 35 years of experience in home textiles, including retail, domestic manufacturing, and imports. For the past 19 years, he has worked at JLA Home, one of the largest home textile vendors in the U.S.