President Donald Trump’s tariffs are a critical tool to reorganize a broken global trading system and push back on economic coercion by America’s adversaries. Unfortunately, China has already figured out a simple workaround: Chinese companies are setting up anonymous shell companies to circumvent tariffs. But while the Trump administration is taking the right steps for America’s economic security by closing the front door to dangerous trade imbalances, it is taking counterproductive steps on anonymity — rolling back the enforcement of the Corporate Transparency Act — and allowing evasion to proliferate out the back door.

Tariff evasion isn’t the only threat that will increase under the proposed CTA rollback. On his first day in office, Trump took the powerful step of designating the drug cartels flooding America with fentanyl as foreign terrorists. Yet while this welcome move takes the handcuffs off law enforcement, the CTA rollback is putting on a blindfold instead. 

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Cartels are widely using anonymous shell companies to set up fake online pharmacies, while Chinese money laundering organizations are exploiting shell companies to funnel cash back to the cartels and their armies of sicarios. To stop fentanyl, Washington must follow the money, and that means piercing the anonymity of shell companies that operate with impunity. This is why Republican prosecutors and other law enforcement officials who want to put these gangs behind bars have forcefully argued against undermining the CTA.

The Trump administration has echoed these concerns, arguing that anonymous shell companies pose a direct threat to national security by allowing “corrupt foreign officials, sanctions evaders, and narco-traffickers” to “exploit gaps” from our failure to collect basic beneficial ownership information, a gap the CTA resolves.

Nonetheless, the Treasury Department issued a new rule in March that eliminates the beneficial ownership reporting requirement for 99.96% of covered companies, despite Treasury pointing out in its own explanation of the rule that its financial crimes unit “highlighted specific examples of significant criminal investigations into the use of shell companies throughout the world to launder money or evade sanctions imposed by the United States, including sanctions evasion by Iran through shell companies abroad.” 

Treasury’s explanation for the rule change goes on to claim these risks only relate to foreign companies, not domestic ones. This is dead wrong.

First, it is wrong because under the new rule, a “domestic” company is defined as any company established in the United States. That is it. Foreign criminals, foreign governments, and foreign terrorists can still open U.S. companies, and (bingo!) they are domestic and anonymous. 

If Russian President Vladimir Putin, Chinese President Xi Jinping, and the ayatollah of Iran wanted to open a Delaware company to sell nuclear weapons, they could do so completely anonymously. If we don’t require American companies to disclose their owners, then nothing stops foreign criminals from using “domestic” companies to commit their crimes.

Anonymous companies can register aircraft with the Federal Aviation Administration and disclose no ownership information, using those planes to traffic drugs, people, or weapons with complete secrecy.

Furthermore, it is simply incorrect to suggest that anonymous domestic companies cannot present a threat to American interests. Of course, they can. American companies, like any company, can be used as a vehicle for crime, tariff evasion, human trafficking, or just ripping someone off. As the Government Accountability Office reported in April, anonymous companies present a clear risk of fraud for federal programs: “When information is unclear about the identity of the person who ultimately owns or controls a company that is participating in federal programs or operations, there is a heightened risk of procurement-, grant-, and eligibility- related fraud.”

Western companies, leveraging anonymous shell companies, have been buying commodities and economically sustaining American adversaries for decades, sending essential funds to support Putin’s Russia, Fidel Castro’s Cuba, Muammar Gaddafi’s Libya, Saddam Hussein’s Iraq, apartheid South Africa, and the Soviets at the height of the Cold War. Secrecy fuels sanctions evasion, undermines export controls, negates tariffs, and weakens the projection of American economic power.

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On the flip side, transparency tools such as the CTA actually supercharge American power. This is something that the Trump administration may come to appreciate.  America’s enemies, terrorist financiers, drug traffickers, or bribe-giving officials of the Chinese Communist Party, all depend on secrecy. As long as law enforcement is diligent and resourced, as it is in America, crime cannot occur openly. Unmask the people and the money behind criminal and corrupt behavior, and our enemies are weak, exposed, and easy to jail.

We need to stop thinking of transparency as a shield and recognize that it is a sword. Transparency is one of the greatest and most poorly exploited weapons of American power, capable of striking at our enemies’ greatest vulnerability: their need for secrecy.

Josh Birenbaum is the deputy director of the Center on Economic and Financial Power at the Foundation for Defense of Democracies.