Small-business owners face higher costs as a result of tariffs, expenses that are often passed on to consumers through higher prices for everyday goods.

Tariffs punish American firms while Navarro blames foreigners.


In both the New York Times and a White House report, Peter Navarro describes the “great transshipment scam” and alludes to a shadow network spanning more than 40 countries. This network, he says, “robbing the United States of tens of billions of dollars a year and countless manufacturing jobs.” To fix this, he wants to increase enforcement through tougher rules of origin, larger import bonds, penalties for shell companies, and an artificial intelligence system named Detective Border to assess the transshipment risk of every ship bound for an American port. Doing all of this will not only flood the Treasury with new revenues but also kick off the long-promised yet currently forestalled manufacturing renaissance. As if that were not enough, it will also make America safer.

Once again, Peter Navarro seeks to explain why tariffs have failed. Back in December, Navarro chastised America for expecting results “on a news cycle.” We were told that all of the positive results were coming; we just hadn’t waited long enough and shame on us for expecting results prematurely. Of course, he neglects to acknowledge that we expected these results because Administration officials had promised them. In March of 2025, Howard Lutnick said that the economy would be “humming” by Q4 2025. It was decidedly not. That same month, Kevin Hassett said that tariffs were “already working” and that “after losing 110,000 manufacturing jobs, we made 10,000 in February alone.” But after more data came in, it turned out that the manufacturing sector had actually lost 2,000 jobs. And then, of course, there are the repeated claims about GDP growth, with Kevin Hassett claiming 6 percent was possible. Not to be outdone, President Trump has recently claimed that we could hit 20 percent.

Now, Navarro claims that the reason tariffs aren’t working is because of foreigners. Once again, Navarro has found yet another scapegoat. Unfortunately for him, this one also falls apart upon further scrutiny.

Navarro claims that foreigners are reorganizing their shipping routes in order to avoid the tariff. But that assumes that they are the ones actually paying the tariffs. In February, the Federal Reserve Bank of New York published a report finding that Americans, whether they be importers or end consumers, paid 94 percent of the tariffs in the first eight months since Liberation Day and were still paying 86 percent. This was also evidenced by the Harvard Pricing Lab, the same study that President Trump cited favorably, and with data from the BLS’s Import Price Index. If anyone is trying to dodge tariffs, it’s not foreigners; it’s the Americans who are paying the tariffs.

So what do Americans do when faced with a tax? We do what we have always done: find ways to rearrange our affairs such that we owe less. Courts have held that this is perfectly legal since at least 1881, when the Supreme Court decided Merritt v. Welsh. There, it held that importers can alter the imported product in such a way as to make the product subject to the smallest tariff so long as the importer is honest about what is being done. Today, this practice is known as “tariff engineering,” and its results are equal parts clever and absurd. Converse stitches a thin layer of felt onto the bottoms of its sneakers so they qualify as slippers and are taxed at a much lower rate.  Columbia Sportswear adds a small zippered pocket below the waist of certain garments and Snuggies are classified as a blanket rather than clothing so they can be exempted from higher duties. Walmart is pushing its suppliers to switch from costly aluminum to fiberglass in order to avoid tariffs.

Notice that these are all large companies. That’s because larger, more established firms have the resources necessary to engage in tariff engineering. Jeff Tooze, the Vice President for Global Customs & Trade at Columbia Sportswear said in 2019, “I have a whole team of people that work with together with the designers and developers and merchandisers and with customs, actually, and to ensure that during the design process that we’re considering the impact of tariffs.” A small business doesn’t have a Vice President for Global Customs & Trade, much less a “whole team of people” who can figure out nuances to import laws to save on tariffs. When they get hit with a tariff, they either pay it or close.

The deeper problem with Navarro’s logic is that he pretends that a product’s country of origin is easily determined. In 1958, Leonard Read published the now-famous essay I, Pencil, showing that even something as simple as an ordinary wooden pencil was the product of tens of thousands of people coming from all corners of the world. In the almost 70 years since, the world has gotten even more complicated. 

More recently, Destin Sandlin, an engineer behind the popular YouTube channel Smarter Every Day, spent four years trying to create a simple grill brush that was 100 percent American-made. Throughout the videos, Destin highlights the difficulty of acquiring materials and equipment needed to make a commercially viable product by looking only in America. As he laments, even simple components made in America rely on foreign-sourced materials. But one point stands out for our purposes here: the use of a CNC fabricator located in Texas. Why is this relevant? Because this Texas firm used a Trimill VS1614 and a Tornos Swiss DT 26 HP, neither of which was made in the US. So is this grill brush “100 percent American-made”? That answer depends entirely upon whether you count the foreign-produced machines as “inputs” into the production of the grill brush. Reasonable people can absolutely disagree on this, which means that the answer will depend upon who you ask and, importantly, how they interpret the law.

This raises the question: why are Americans going through all the trouble of finding ways around the tariffs to begin with? Why hire teams of engineers and lawyers to find physical and legal loopholes? The answer, of course, is that tariffs are hurting American businesses.

This isn’t the first time we’ve heard that high tariffs have hurt Americans. President Trump said as much himself in June by signing Proclamation 11032. There, he lowered tariffs to  “more effectively address national security threats, spur investment in American agriculture, housing, and manufacturing, and facilitate U.S. production of related products.” Not wanting to leave farmers out of the mix, President Trump later suspended “certain anti-dumping and countervailing duties in connection with importation of phosphate fertilizer from the Kingdom of Morocco” so as to “safeguard America’s food supply and support domestic agricultural production.” Finally, he has also temporarily lifted some tariffs on foreign beef imports.

Navarro’s most defensible position is that all of this is worth it if it bolsters national security. As he and other protectionists allege, a nation that cannot forge its own steel or build its own motors lies at the mercy of its rivals. However, true security comes from reliable access to materials. Domestic production is one way to accomplish this goal, just as a household growing its own food is one way to make sure that food is never in short supply. But as we’ve seen, it’s simultaneously more expensive and less reliable. A nation like the US, which, according to a US Trade Representative report, buys its steel from Canada, Brazil, South Korea, and 70 other countries, is not being held hostage by any one of them and has procurement options should any falter.

Unfortunately, the very countries that we would rely on if a genuine crisis ever cut us off from a hostile supplier are also being subjected to tariffs. Putting tariffs on Canada, Mexico, Australia, Europe, and Japan does nothing to weaken Beijing. Instead, it gives our closest allies all the reason to seek other partnerships and is uniting our enemies against us. Today, when President Trump asked other nations to join in the Iran conflict, threatening to cut off trade with them if they did not, Spain and Italy responded by closing their bases and airspace to the US for military operations. The rest of Europe seems to have followed suit. It is difficult to see how this has improved national security.

So, what would better enforcement and Detective Border actually accomplish? It would saddle American taxpayers with the cost of increased enforcement so that American businesses can pay more in tariffs, and American consumers can pay even higher prices. It would further alienate our friends and unite our enemies.

The truth is that forty nations are not running a scam on the US. Americans are keeping more of what they earn, as has been their right for the last 145 years. Navarro seeks to restrict this with tighter rules of origin, larger bonds, and an AI named “Detective Border” that would scan every ship for the crime of buying wisely. All that this would accomplish is adding a customs officer, AI or otherwise, to the price of imported goods. It would not make us more prosperous or safer.

There is a much easier answer to addressing Navarro’s concerns: end the tariff experiment once and for all. By doing so, the “transshipment scam” that Navarro worries about will be completely put to rest. There would be nothing to relabel, nothing to engineer around, and no need for Detective Border. The American worker, including in manufacturing, is already incredibly productive and the envy of the world. They do not need protection and they never have.

The original version of this article was published on independent.org.