This paper examines the relationship between the suppression of coastal smuggling and the transformation of state authority in China during the Nanjing Decade (1927-37). Starting from 1928, the Nationalists recovered China's tariff autonomy and raised import duties for the first time since the mid-nineteenth century. Higher tariffs helped underwrite an ambitious state-building agenda, but they also sparked a widespread smuggling problem. With revenue and security under threat, the state fought back with an extensive campaign to stamp out smuggling by creating and enforcing new definitions of "legal" trade. Using legal cases and codes, customs records, and popular press reports, this paper traces ways fighting illicit trade ultimately enhanced state capacity. Situating the war on smuggling within the ideological shift in Chinese statecraft from Confucian restraint to interventionist management, this paper also reconsiders the developmental trajectory of the modern state and reassesses the impact of regulations on everyday commerce.