Flexport CEO: $112 Billion in Tariff Fraud Is Happening Right Now — And Washington Won't Fix It
Ryan Petersen lays out a blunt case for a broken import system, the Hormuz crisis, and who wins when global trade falls apart — Relentless podcast, May 26, 2026
The Tariff Fraud Nobody Is Talking About
Ryan Petersen, founder and CEO of Flexport, has spent the better part of six months flying to Washington once a month trying to get someone to pay attention to what he describes as a gaping hole in the U.S. import system. So far, he says, the response has been smiles and nods. The numbers he is sitting on deserve more than that.
Flexport pulled Chinese government export statistics and compared them against what those same goods are declared as upon arrival in the United States. The gap for 2025 was $112 billion. At a 35% tariff rate, that represents roughly $35 billion in duties the U.S. Treasury never collected. Petersen believes the number will keep climbing until structural changes are made.
The mechanism is straightforward. Before Trump's tariffs, duties were low enough that underreporting the value of goods was more trouble than it was worth. At 145% — the peak rate for a few weeks — and even at the current 35%, the incentive to lie about invoice values is enormous. "People are just saying this thing is $10,000, not $100,000, and now instead of paying 35% they're paying 3.5% and they're back where they were before," Petersen explained. He says the practice is rampant among Chinese merchants selling on Amazon and others, and the enforcement problem is structural, not just operational.
Under a quirk that exists in only two countries — the United States and the United Kingdom — a foreign company can import goods without establishing any domestic legal presence whatsoever. No LLC, no U.S. bank account, no KYC process. "It's an honor system," Petersen said. "If you're caught, the best the U.S. can do is refer you to the Chinese government for prosecution." In practice, that means open season.
The fix, in his view, is not complicated: require any importer to establish a U.S. entity, go through a know-your-customer process, and create real consequences for cheating. It would not eliminate fraud entirely, but it would reduce it materially. More striking is the national security framing he is now testing in Washington after the trade-and-tax argument failed to land. "You can just import anything into this country. Anything. Fentanyl, bombs. If we catch you, we might come after you, but we're not really going after the people importing fentanyl." The IRS angle is also underused, he argues: because the profit on these transactions is booked offshore, no U.S. income tax is owed either.
There is one piece of this story that Petersen flags as genuinely unreported. He claims Amazon has quietly become the single largest freight forwarder on the transpacific trade lane — beating out every traditional logistics company — and that a significant portion of that volume is being driven by third-party merchants using Amazon's infrastructure to route undervalued goods into the country. "I allege," he said carefully, "it's allegedly a huge amount of fraud that's happening where these merchants with their brand name of XYZ47 are just lying and undercutting everybody on price because of it."
Hormuz: No Alternative Route, No Easy Answer
If the tariff fraud story is the slow-burn problem, the Strait of Hormuz is the acute one. Petersen is blunt about what the closure means and does not buy the argument that America comes out ahead because of rising domestic oil exports.
Twenty percent of the world's oil flows through Hormuz. Unlike the Red Sea disruption caused by the Houthis — where ships can and do reroute around Africa at a cost of about three additional weeks and roughly 50 to 60% higher ocean freight rates — Hormuz is a dead end. There is a Saudi pipeline that carries some oil, but Petersen notes it can be blown up too. "There's no alternative route. It's a cul-de-sac," he said. Since the strait effectively closed at the end of February, the U.S. Navy carrier group deployed to the region has not been able to reopen it, which Petersen treats as a significant signal about the limits of American power projection.
The knock-on effects extend well beyond crude oil prices. Petersen points to fertilizer — 30 to 50% of global supply depending on type originates in the Middle East — and helium, where Qatar alone produces roughly 30% of global output. He is particularly pointed on helium: "People think of it for clowns and blimps, but the most important uses are producing semiconductors and SpaceX rockets. You can't do either without helium." Unlike oil, helium cannot be manufactured. It accumulates through radioactive decay of uranium and thorium deposits over geological timescales. Taking 30% of global helium supply offline is not a price problem that money can solve in the short run.
Air India cutting international flights by roughly 10% as of the time of recording is the kind of early-stage real-economy signal Petersen says the financial markets have not fully absorbed. His concern is not just that prices rise, but that some countries simply get outbid entirely. "Tankers are rerouting in the middle of the ocean because trades are getting made and countries like Laos just don't have enough money to compete when oil prices spike." He sees a scenario where having a strong national government capable of cutting direct deals becomes a meaningful geopolitical advantage over private-sector buyers operating on open markets.
He is willing to acknowledge the winners: U.S. oil exports have hit all-time highs essentially every week since March 1st, and American energy producers are benefiting directly. Texas university NIL budgets, he quips, are about to go through the roof. But he pushes back hard on the idea that this is net positive. "It's the same fixed-pie mistake. Yes, America takes a bigger share. But if you lose 20% of world oil supply and everything that falls out from that, the pie shrinks and there is a lot of suffering." He draws a distinction between Trump's political incentives — where dominating global energy markets may be exactly the agenda — and sound economic reasoning for anyone actually trying to run a business.
Petersen is also honest about his own forecasting record. He predicted Russia's invasion of Ukraine would trigger mass famine across Africa given Russia and Ukraine's combined share of global grain exports. It did not happen, partly because Russian grain kept flowing and Middle Eastern fertilizer exports surged to fill gaps. "The economy is this crazy complex adaptive system that's more resilient than you expect," he said. "But complex adaptive systems are very resilient until they break down and fail. And we are playing with fire with Hormuz."
The Long History Behind Today's Trade Wars
Petersen uses a sprawling tour through the history of global trade partly to entertain and partly to make a serious point: the dynamics investors are watching right now — fraud incentives, chokepoint vulnerability, the tension between national power and commercial openness — are not new. They are recurring features of every era of global commerce.
The Dutch East India Company, the world's first publicly listed joint-stock company, was born out of competitive pressure driving down margins once too many merchants were sailing the same routes. Merchants pooled their ships, allocated shares, and created a monopoly — something he notes would be illegal under modern antitrust law. The British East India Company followed the same playbook: politicians were given large share allocations in exchange for legislating the monopoly, and the Royal Navy enforced it by boxing out French competition. "It was largely through bribery," Petersen said without apparent judgment.
The opium trade is the episode he dwells on longest because he thinks it still shapes geopolitics today. The British couldn't find anything the Chinese wanted to buy — tea, silk, and porcelain flowed west while silver drained east — until they discovered that opium from India and Afghanistan could balance the books. At its peak, the trade left somewhere between 20 and 30% of the Chinese population addicted. When China tried to ban it, the British sent gunboats, burned the emperor's palace in Beijing, and forced the trade to continue. "The Chinese are still very bitter about this, and rightfully so," Petersen said.
The American angle is less well known. The Forbes family — not the magazine family — was based in Boston and handled roughly 20% of all opium shipped into China. They are the origin of the "Boston Brahmin" wealthy elite, their old estate is now a museum of the China trade, and the family patriarch is, or was recently, John Kerry. "I don't think China took lightly to the fact that Obama made him the Secretary of State to negotiate with them, because they have a long memory," Petersen said. His personal theory about why Chinese officials famously failed to roll out the stairs for Air Force One during Obama's visit involves exactly this history.
Bills of Lading, Blockchain, and the Coordination Problem That Never Goes Away
One of the more durable insights from the conversation concerns the mechanics of trust in global trade and why they remain almost comically archaic. Petersen notes that roughly 5% of Flexport's customers still require a physical, paper bill of lading — a document whose origins date back 500 years — and that mailing these pieces of paper around the world remains an actual part of his company's operational stack. "It's not very hard to fake a piece of paper," he said, deadpan. Some banks still require them as collateral to unlock payment.
The history here is instructive for anyone thinking about blockchain or stablecoin-based trade finance. DHL, now better known as a parcel company, was originally founded as a courier network specifically to solve the problem that containerized shipping had become faster than the mail carrying the bills of lading that served as title for the containers. Travelers were paid in plane tickets to carry duffel bags full of title documents. That is, in essence, what Flexport and its competitors are still trying to digitize a half-century later.
The underlying coordination problem — getting parties on different continents, speaking different languages, with different incentives, to execute complex multi-leg transactions — is what Petersen identifies as the core difficulty of the freight forwarding business. He mentioned that Flexport launched an AI translation layer a few months ago that allows trading counterparties to communicate in their native languages in real time. He frames English itself as one of the great historical innovations in trade infrastructure, drawing a line from Venetian merchant networks through Jewish trading diaspora through British maritime dominance to the modern dominance of English as the lingua franca of commerce.
The Jewish trading network discussion is the one that most directly applies to the current fintech and stablecoin conversation. Petersen argues — crediting others for the observation — that tradable debt is the foundation of capitalism, and that its origins lie in Talmudic law, which allowed debts to be sold to third parties, in contrast to Roman law, which did not. "In Roman law, I owe you money. I can't sell what I owe you to someone else. Under Jewish law, you could sell the debt. That's literally a bond." The trusted-network problem that ethnic minorities solved through communal ties in the pre-telegraph era is exactly the problem blockchain advocates claim distributed ledgers can solve today. Petersen is a measured skeptic: the technology is an evolution of a very old system, not a revolution.