IN A HIGHLY interdependent world, where countries are connected through intricate networks of trade and finance, economic decisions in one capital can ripple across continents. The recent wave of US tariffs, designed to reduce reliance on Chinese manufacturing and protect domestic industries, sent shockwaves through this global system.
What began as a strategic trade standoff between two superpowers has evolved into a broader economic disturbance with under-explored consequences. While much attention has focused on Gross Domestic Product (GDP) growth and local job protection, a hidden cost is emerging with significant implications for businesses and regulators: a rise in white-collar crime.
“The Rise in White Collar Crime,” a term coined by sociologist Edwin Sutherland in the late 1930s, refers to non-violent offences committed by individuals in positions of trust. These include fraud, tax evasion, embezzlement — and increasingly, trade-based financial crimes like under-invoicing, misclassification of goods, and transhipment fraud. As tariffs distort traditional trade incentives, they also open the door to illicit workarounds that cost governments billions of dollars and challenge law enforcement.
Incentivising cheating
Research shows a significant correlation between rising tariffs and an increase in trade-based financial crimes. A study by Raymond Fisman and Shang-Jin Wei found that when tariffs rise, so does under-invoicing — where firms deliberately report lower prices on imports to reduce duty payments. Similarly, Hufbauer et al. (2019) noted that higher tariffs give firms greater incentive to misclassify goods by labelling high-tariff products under lower-tariff categories. This pattern was evident during the 2019 US-China trade war.
Tariffs were slapped on over USD$360 billion of Chinese imports. In response, some American companies began re-routing goods through third countries like Vietnam and Malaysia to obscure their origin — a deceptive practice known as transhipment. According to a case study by Nguyen & Nguyen (2023), these countries saw a sudden spike in export volumes to the United States, well beyond their usual capacity, signalling a likely cover for Chinese goods.
Similar concerns have surfaced more recently, closer to home. Early last year, Singaporean authorities launched a probe into whether high-end Nvidia Chips which were subjected to US export restrictions were routed to Singapore and Malaysia to bypass controls aimed at China. While investigations are ongoing, this case highlights the significance of how third countries, especially those which rely heavily on imports or functioning as transhipment hubs, like Singapore, can become unwitting nodes in such illicit trade practices, particularly in sectors most affected by escalating trade tensions.
At the same time, US Customs officials reported a surge in suspicious import declarations. For instance, tariff items such as computer monitors were increasingly being labelled under lower-duty classifications like generic electronic parts. These practices not only violate trade laws but also highlight how tariffs can inadvertently slide firms toward criminal behaviour.
Why risk it?
For many businesses, particularly small and medium enterprises (SMEs) with thin margins, tariffs impose immediate and significant financial strain, intensifying the pressure to seek cost-saving measures. Singapore, with its large SME base and reputation as one of Asia’s most reliable trading hubs, is not immune to these pressures.
In today’s unpredictable economic climate, many SMEs are grappling with rising business costs; not only due to the US tariffs, but also intensifying competition from China whose extensive and integrated manufacturing ecosystem offers it cost advantage.
Under such duress, firms may be tempted to bend rules or engage in questionable trade practices simply to stay afloat. As noted by the Association of Small and Medium Enterprises, local firms must now compete in what has become a “red ocean” of global trade. When compliance with trade rules threatens survival, the line between legal optimisation and illegal evasion begins to blur. Some may see deceptive declarations as temporary stopgaps. Others may rationalise such actions as necessary to compete in a system they view as already tilted.
This problem is compounded by the complexity of international trade enforcement. With millions of shipments crossing borders daily, customs authorities often lack the resources to detect every infraction. This creates a low-risk, high-reward environment for fraud – especially when penalties, if imposed at all, are minor compared to the gains.
The broader implications
White-collar crimes like these erode the integrity of the global trade system. They create unfair advantages for dishonest actors, distort economic data, and deprive governments of essential revenue. More broadly, they place additional burdens on law enforcement, regulators, and honest businesses which play by the rules. As these activities become more sophisticated and global in nature, detection and prosecution grow harder. Trade fraud is often buried in paperwork, conducted across jurisdictions, and shielded by shell companies or opaque supply chains.
The result is not only financial damage but also declining trust in institutions meant to uphold market fairness.
Tackling the hidden costs
Policymakers must acknowledge that in a multipolar world, economic tools like tariffs do not operate in a vacuum. While they may serve strategic goals, they can also produce side effects that undermine those same objectives. To counter the rise in white-collar crime, we should consider a two-pronged approach: smarter enforcement and more transparent trade systems.
First, investment in data-driven customs enforcement — using AI and real-time analytics — can help authorities detect anomalies in import patterns and invoice data more quickly, accurately and at a larger scale.
Second, international cooperation is vital. Trade fraud often exploits the gaps between national borders. Strengthening cross-border intelligence sharing and legal cooperation is key.
Given its strategic location, Singapore, a major trading hub with firm regulatory institutions, is well placed to play a catalytic role in facilitating multi-national co-operation. By working closely with regional partners to develop tighter enforcement protocol data sharing frameworks and capacity building efforts, Singapore can help prevent such fraudulent behaviour from occurring.
Finally, governments must recognise that policies such as tariffs can unwittingly encourage businesses to adopt illegal shortcuts. Therefore, trade policies should be designed not only as economic tools but as a mechanism as well, to prevent fraud and protect trade integrity. With its reputation for the rule of law, Singapore can lead by example by promoting trade integrity, through enforcement, leadership and multilateral dialogue.
The recent US tariffs aimed at shielding domestic industries have sparked a wave of hidden consequences. As businesses scramble to adapt, some cross legal lines, fuelling a rise in white-collar crime that threatens the fairness and stability of global trade.
By shedding light on this issue, policymakers and regulators can rethink how economic policies promote prosperity and integrity.
Vanesia Khoo is a research practitioner specialising in applied research and insight reporting. The opinions expressed are the writer’s and do not represent the views and opinions of her employer.
Top photo from Pexels