For those in China’s cross-border trade business, a sweeping tax crackdown is beginning to be felt. Heightened scrutiny of unreported overseas income is reshaping cost structures, squeezing margins and forcing exporters to rethink how they operate across borders. “It has taken a real bite out of profits,” said Henry Huang, a Zhejiang-based exporter who now faces higher taxes yet little room to pass on costs to price-sensitive customers in the United States and Europe. “It’s hitting everyone in...