Tariff Enforcement Enhances Bureaucracy, Not Competitiveness

The investigation into Anker Innovations Co.’s alleged tariff evasion shows that tariffs may turn out to be sprawling bureaucratic projects that burn taxpayer resources on compliance rather than foster competitiveness.

If such investigations become the norm, they will necessitate the setup of their own bureaucracies. This raises the question: If tariffs are tools of economic nationalism and a stimulus for domestic industry, why do they look so much like job creators for customs officials and trade attorneys?

Enforcing tariffs isn’t as simple as posting a new rate schedule on social media, slapping a percentage on a shipment of headphones, and calling it a day. Every adjustment to the Harmonized Tariff Schedule creates a vast administrative network.

This includes customs officials on the public side, compliance consultants and trade lawyers on the private side, and endless debate about the classification of products between the two. (So much for small government.) It’s ironic that the policy tool being sold to shore up domestic production underwrites an ecosystem of regulatory middlemen.

The irony only deepens from there. While Congress and the Trump administration starve the IRS of resources that could help ensure corporations pay their fair share of taxes, policy makers are made to lean on tariffs—a more complex revenue mechanism—to do the job. If hollowing out one enforcement agency has left the tax code vulnerable to gaming, why would we expect a newly expanded tariff bureaucracy to fare any better?

What seems like a predictable result is that an expensive compliance regime ultimately becomes more about process than outcomes. Complexity and inefficiency may not be deliberate, but they will still generate work for an entire industry of intermediaries.

In practice, every tariff creates an enforcement dilemma. A misclassified pallet of USB-C charging bricks or a shipment of wireless headphones routed through Vietnam may technically violate US tariff rules, but catching bad actors may require a costly investigation that takes months or years to trace and unwind.

Customs can either opt in to that paper trail trace, draining both taxpayer resources and corporate legal budgets, or look the other way. Neither appears to be a defense of US workers, besides bureaucrats.

Instead, the shift toward tariffs—and away from tax enforcement—incentivizes case-by-case discretion, where the real cost of so-called protectionism is borne by the regulators and companies stuck navigating procedural limbo and, consequently, end consumers.

That limbo is where corruption thrives. In practice, tariff enforcement may have less to do with protecting domestic production capacity and more to do with deciding which foreign firms and domestic importers to single out.

Smaller players may be stuck paying full freight, lacking the necessary resources to contest customs rulings. Meanwhile, larger firms can hire advisers and lobbyists to litigate and get out ahead of classifications or shipment route issues.

Tariffs’ economic incidence may turn less on corporate patriotism and more on who can afford better legal and lobbying teams. Of course, that may turn out to be less of a bug in deemphasizing taxes and emphasizing tariffs and more of a natural consequence.

The tax code can be bent to suit individual corporations, but it takes serious legislative engineering or creative tax incentive structuring to do so. By contrast, tariffs seem to be subject to the whims of the executive—at least until the US Supreme Court weighs in. This makes them a far nimbler tool for tailoring individual outcomes.

If tariffs are going to soak up taxpayer resources and corporate compliance budgets, and be treated as replacements for serious tax enforcement, the rules should at least be durable. Right now, companies like Anker might spend years litigating classifications only to watch tariff policy shift overnight. That volatility makes enforcement a matter of asking trade court litigants to run to where the ball will be.

That’s why tariff powers have historically rested with Congress, outside of genuine emergencies. A slower moving, more deliberative body may be messy and frustrating in its inaction, but it makes trade policy more predictable and legitimate.

Restoring tariff authority to Congress and shifting the corporate equity emphasis back to the tax code would give regulators and businesses firmer footing. At the very least, the system must not become a resource-wasting game of chasing rules that may not last beyond the next news cycle.

Ultimately, the Anker probe isn’t really about the country of origin for some cellphone chargers. It’s a case study in what happens when tariffs by executive fiat substitute for tax enforcement.

Andrew Leahey is an assistant professor of law at Drexel Kline School of Law, where he teaches classes on tax, technology, and regulation. Follow him on Mastodon at @andrew@esq.social

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