The Aftermath Turbulences of Tariffs and High Duties in Global Trade and Commerce
A recent 2026 U.S. Trade-Tariffs Conundrum has illustrated the 2nd and 3rd order effects of the long-term impacts of higher tariffs and duties on trade and how they will continue to contribute to the expansion of the global illegal economy:
Higher tariffs on imported goods or higher duties on certain goods frequently act as a catalyst for increased criminality, counterfeiting or illegal domestic manufacturing and the proliferation of cheaper, often illicit, alternatives – expanding the global illegal economy and black markets.
By raising the cost of legitimate goods, tariffs and related taxes create a price gap that criminal entrepreneurs and counterfeiters exploit, making illicit goods and black markets more attractive to cost-conscious consumers.
Numerous case studies have shown that while reducing tariffs after they have been raised does lower the cost of imported goods or taxes on excise goods, for example, it does not necessarily eliminate the growth of illicit markets which benefitted from the increased demand for cheaper, counterfeit, or illicit goods triggered by earlier tax, trade policies, and economic conditions.
Moreover, lowering tariffs or taxes to earlier rates do not eliminate the incentivized criminal behaviors, infrastructure, counterfeit operations (or illegal manufacturing) or smuggling networks that are deeply entrenched and profiting from illicit trade often with complicit state actors.
Did the Trump Tariffs Incentivize Illicit Trade
In light of a recent U.S. Supreme Court decision finding the Trump Tariffs unconstitutional, we need more evidence-based research and case studies on the following issues/questions:
1) the broader global impact of higher tariffs (duties) on the possible expansion of illicit trade and/or illicit markets internationally, including the abuse of transshipment points or Free Trade Zones (FTZs); and
2) do global illicit markets (high criminal market penetration) remain in place when tariffs or duties are subsequently lowered as consumers get accustomed to the cheaper – including fake or counterfeit – alternatives and don’t gravitate back to the earlier brands and goods that they were buying before these tax policies were instituted?
The Licit-Illicit Trade Conundrum
Around the world, higher tariffs lead to consumers paying more out-of-pocket for imported goods. There are diminishing returns on revenue as tariffs hit a certain percentage point that has collateral damage to a national economy.
In many instances, higher tariffs and duties on consumer goods also lead to an increase in illicit trade, more counterfeits, cheaper (lower quality) goods, and organized crime.
But what happens in high tariffs trade policy regimes or in markets with high excise tax, once higher tariffs or duties are lowered (e.g., recent U.S. Supreme Court decision that the Trump tariffs are unconstitutional)? Or when excise taxes are lowered?
Do illicit markets remain in place as consumers have become accustomed to the cheaper – including fake or counterfeit – alternatives and don’t gravitate back to the earlier brands and goods that they were buying before these tax policies were instituted?
Kine-Dynamics/Threat Convergence: There is concern in some law enforcement communities that higher tariffs and taxes actually fuel greater illicit trade and the expansion of illicit markets, and related organized crime, illicit trafficking and smuggling, and tax evasion.
David M. Luna is the Executive Director of the International Coalition Against Illicit Economies (ICAIE), co-Founder of Illicit Shadows Media, and a former U.S. diplomat and national security official charged with strengthening international cooperation and public-private partnerships on fighting crime convergence threats including the inter-connected links between drug cartels, transnational criminal organizations, illicit trade networks, terrorist groups and related corruption and money laundering.
