The Silent Heist: How China’s Trade Cheating Is Gutting American Manufacturing
Harsh experience has shown that without robust enforcement, tariffs are ineffective
Image by Grok
On this week’s episode of “Manufacturing Talks,” I chatted with David Rashid about trade cheating and trade fraud.
Rashid spoke from personal experience. He’s a former division head of manufacturing who ran nine plants that made automotive brake lines, fuel lines, and transmission coolers across the US, Mexico, Canada, China, and Slovakia. And he watched as American tool-and-die expertise was literally shipped overseas. As he told me in our pre-show interview, “I witnessed—I didn’t even know what I was witnessing at the time—but I witnessed the exportation of the skill to the point where the tool and die shops were dying on the vine in in the United States and in Canada.”
What began as naïve cost-cutting evolved into systematic trade cheating—IP theft, transshipment, duty evasion—that is destroying US factories, jobs, and strategic industries.
Love them or hate them, tariffs are held out as a means to prevent these trade depredations and disparities.
But the facts on the ground show clearly that there are too many ways around our current tariff regime. Enforcement, not tariffs alone, is the missing piece.
To dig into this further, I also spoke with Milton Magnus, the CEO of M&B Hangers, which makes wire garment hangers, and Brad Muller, VP of Corporate Communications at pipe and fitting producer Charlotte Pipe and Foundry. They further filled in the details of a tale of missteps and treachery that includes everything from tooling “training” missions to Thai front companies and Department of Justic (DOJ) paralysis to new bipartisan remedies.
How Trade Cheating Actually Works—and Why Silence Reigns
Trade fraud is nothing new. But it got supercharged when American companies clamored after the potential cost savings on offer when the U.S. granted China Most Favored Nation trading status at the turn of the century.
To cite just one industry example from the tool & die world: American CEOs demanded Chinese tooling quotes from that country’s subsidized producers. David described how things proceeded from there: “These Chinese companies would come in at a fraction of the cost. But we would have to send our best toolmakers over to China to help. The Chinese would come over here and continue to work on them. What we were doing was just providing the training—and we all fell for it.”
The result in the ensuring several years was that U.S. and Canadian tool-and-die shops, as David said, died on the vine. We lost not only that productive capacity, but eventually the skilled toolmakers that supported it, and with them the capability of producing in that realm at all.
This same scenario played out in several other industries as well, with notable examples being textiles and garment-making, chipmaking, steel, and pharmaceuticals. “You know, China was smart the way they did it,” noted Milton. “They targeted some really strong industries, like the steel industry in the United State, and they’ve gone from making less than 10% of the world’s steel to 70% of world’s steel in about 25 years. And it just doesn’t happen because you’ve got a better product, and especially when you don’t have a better product.”
By the time of the first Trump administration, a growing number of policy experts and manufacturing leaders alike were sounding the alarm about the national security implications of this targeted hollowing-out of vast segments of our industry. That led to the first wave of protective tariffs beginning in 2018.
But those immediately led to rampant cheating. The favored method was transshipment via Thailand, Cambodia, Malaysia, and Mexico. The evidence for this soon piled up: the impossibly quick shifts of parts sourcing seen on ImportYeti; fishy Harmonized Tariff Schedule codes; weight mismatches; identical parts from “different” plants; and thermogravimetric rubber analysis proving identical compounds and tool markings.
At one point, private investigators confirmed Thai “plants” were domestic Asian suppliers with the wrong equipment to make what they were supposedly making—pure fronts.
You would think this sort of business malfeasance would have led to a substantial outcry from the corporate community.
But in this case you would be wrong.
Part of that is because companies still wanted those promised cost savings, so their executives and sourcing organizations were completely lacking in curiosity about potential fraud.
There was also fear. Many manufacturers chose to stay quiet out of fear of retaliation from customers and suppliers. There was existential risk for single-commodity businesses, while diversified firms hoped they could ride out the problems, since “it’s just one product line.”
On the positive side of the ledger, the silence hasn’t been universal. Another rampant cheating mechanism was the de minimis exemption loophole. That was where foreign suppliers took advantage of a tariff-free allowance on low-value (under $800) individual shipments that was meant to exempt only very small businesses from duties. But larger firms simply divided their shipments into many small ones to avoid tariffs. In that case, however, there was a tremendous and lasting outcry from the business community that finally led the Trump administration to close the loophole a year ago. It’s a real-world lesson in how both advocacy and enforcement work.
The Human and Economic Cost of Trade Cheating
For domestic manufacturers, there are very real costs to our less-than-stellar record of tariff enforcement. The direct losses include lost customers and shuttered plants (with the all-too-real example of Charlotte Pipe and Foundry being forced to close an Ohio foundry recently, despite winning ten out of ten of its Enforce and Protect Act cases).
David’s outfit, the Alliance for Trade EnforcementNOW, estimates that U.S. companies have lost of $230 billion to trade fraud since 2018, and that it has driven the loss of 2.1 million manufacturing jobs in the this country.
There are ripple effects as well. We’re financing China’s international expansion: two-thirds of new leases for warehouses in Savannah, Georgia, have gone to Chinese importers. Meanwhile, entire American supply chains are hollowed out, including steel, rubber, and metal stampings.
But it’s even worse than that. As Brad explained, it has implications for everything from our ruinous national debt situation to our military: “You know, we’re paying for China’s military and our military. We’re funding both sides right now with our debt.”
The Broken Enforcement Machine
Our lack of enforcement is a widespread dilemma with numerous root causes.
One overarching problem is DOJ risk aversion after the Enron and Arthur Andersen debacles. When everybody is doing everything possible to avoid blame, nobody is taking responsibility for getting things done.
As a result, the wheels of justice just move far too slowly. False Claims Act filings are ignored for six months or more. Hand-offs from Customs and Border Patrol/Homeland Security Investigations to the DOJ stall on complexity. As a result, cases take eight or nine years, but the shell companies involved in the fraud dissolve in just a year or two.
When those companies reconstitute under new names, even winning doesn’t matter because fines become uncollectible. And that’s when there’s a clear outcome, which is unfortunately rare. Only 26 cases of Section 301 tariff fraud were resolved from 2023 to 2025—fewer than ten per year.
The Fix: A Five-Point Platform and Emerging Alliances
The short-term legislative priorities for the folks working to fix those problems include the following (all of which are either introduced or ready for co-sponsors):
The PAIL Act—fund a real Trade Crime Unit (5–10 people, ~$5 M) with coordinating power, training, and annual congressional reporting.
The Manifest Modernization Act—require air/rail/truck manifests (closes Canada/Mexico loopholes).
The SAFE Act—end the non-resident importer loophole.
The Fighting Trade Cheats Act—give injured producers a right to sue, with triple damages, import-license revocation, and injunctive relief.
Mandatory transparency metrics on every enforcement tool.
The good news is that there is now growing grassroots momentum, including the Coalition for a Prosperous America, cross-industry alliances (auto fluids, cast-iron pipe, kitchen cabinets, 3PL, hangers), living petition gaining signatories, and congressional champions.
There has also been a cultural shift. For decades the free trade philosophy held sway in both of America’s major political parties. The dire results of that approach have become all too apparent, and people are now realizing that the free trade ideal, which is certainly laudable, rests on countries competing fairly—and that that has not remotely been the case when it comes to China. The pendulum has therefore swung to “fair trade plus enforcement” with recognition that protecting our manufacturing base is a national security imperative.
Conclusion: A Moment of Reckoning
Without an industrial base, the robust national defense Americans take for granted is impossible. The reality of our crises in areas like shipbuilding and pharmaceuticals have helped focus minds around the need for action.
The Covid supply-chain shocks were also a wake-up call, when we saw in real time how our inability to make things for ourselves could affect our everyday lives.
Those of us directly involved in industry have a duty to act. We must demand enforcement transparency and support the five-point platform above. It’s far past time that we refuse to accept any longer that cheating is “just business,” and recognize that cheap imports today become tomorrow’s empty and shuttered factories, vulnerable supply chains, and worst of all, a nation at risk.
All I can say Jim is, scary.