Counterfeiters winning trade war?

Counterfeiters winning trade war? | Daily Tribune

As President Donald Trump once again reignited the US-China trade war with sweeping new tariffs, the fast-growing counterfeiting industry is feared to capitalize on this economic showdown.

One of the loudest accusations hurled by the US against China was its role as the epicenter of counterfeit production. A 2016 study by the OECD and the EUIPO showed that China accounted for 65 percent of the total seizures of counterfeits from 2011 to 2013.

Everything from luxury goods and electronics to fashion and cosmetics has been counterfeited with precision, often targeting iconic Western brands from the US, Europe, and beyond. Counterfeits have also infiltrated sectors critical to health, transportation, and even national defense, posing direct risks to public safety and national security.

Ironically, the very protectionist policies meant to defend domestic industries from counterfeits may be giving counterfeiters easy access to a golden opportunity. By making legitimate imports more expensive through tariffs, businesses are forced into difficult trade-offs: pass the cost on to consumers, absorb the losses, or seek cheaper alternatives — often from questionable sources.

For shoppers, the choice is between a rock and a hard place — either swallow inflated prices or settle for low-cost alternatives, which may very well be fake.

And that’s when the floodgates open. As the prices of authentic goods rise, so does demand for counterfeits. Unlike their aboveboard competitors, fake goods producers are nimble, fast, and ruthlessly efficient. They dodge regulations, cut corners without a second thought, and adapt to market trends almost instantly. It’s business with no rules and big rewards.

Much of counterfeiting’s explosive growth rides on the back of e-commerce. With high quality photo listings and fast delivery, counterfeiters can easily camouflage as legitimate sellers, slipping into the carts of unsuspecting consumers. E-commerce has also redefined logistics, prompting counterfeiters to learn more sophisticated tactics to outmaneuver tariffs, such as via transshipping.

Transshipping involves routing goods through third countries to mask their true origin and evade tariffs. In this new tariff climate, counterfeiters are increasingly using Southeast Asia as a relay point, rerouting goods through countries like Vietnam and Malaysia and relabeling them as “Made in [Not China].” Chinese intermediaries even advertise these services openly, offering to help manufacturers circumvent restrictions by altering documents and disguising shipping routes.

Aside from transshipment, Chinese firms can relocate to dodge tariffs. As with how the tariffs in Trump’s first term forced manufacturers out of China, the trade war could once again drive Chinese businesses, including counterfeiters, to seek cheaper labor, lower customs duties and laxer enforcement in neighboring countries. Add to this the current vastness of free-trade zones — now over a hundred globally — and you’ve got the perfect storm: lax customs, murky paperwork and loopholes wide enough to drive a shipping container through.

For shoppers, the choice is between a rock and a hard place — either swallow inflated prices or settle for low-cost alternatives, which may very well be fake.

As counterfeiters spread their manufacturing footprint and their counterfeit operations with them, it could be exponentially harder to trace counterfeit goods as they emerge from a widening web of source countries.

All this raises an inconvenient truth: tariffs alone won’t solve the problem. In fact, without complementary policy innovation and enforcement strategies, they may worsen it. Without parallel investments in smarter policies, cross-border enforcement, and modernized customs infrastructure, tariffs may even backfire.

Worse still, the deepening rift between Washington and Beijing is likely to erode already fragile cooperation between US enforcement agencies and Chinese authorities, making coordinated crackdowns on counterfeit networks even harder to execute.

So while Beijing and Washington continue to tally the costs of their escalating trade war on their economies, counterfeiters could soon be quietly counting their profits.