How To Avoid Paying Tariffs? Have a Friend in Washington.
American businesses bore the brunt of the tariffs hiked by former President Donald Trump, but having the right friends allowed some to dodge those higher costs.
Politically connected firms—specifically, those that donated to Republican candidates, including Trump—were more likely to succeed when asking the government for an exemption on imports that would normally be subject to tariffs, a new report concludes. It’s a finding that seems particularly relevant at the moment, as Trump is campaigning on a promise to hike more tariffs if he returns to the White House, while some conservatives see a potential second Trump term as a chance to reward friends and punish enemies.
In the study, four researchers reviewed 7,015 applications for exemptions that companies filed with the Office of the U.S. Trade Representative. Of those, only 1,022 were approved—but requests from companies that reported spending more on lobbying were more likely to gain approval. Companies with political action committees that made campaign contributions to Republicans were even more likely to score an exception, while those that donated to Democrats were more likely to have exemptions denied.
“Our findings reveal that politicians not only use exemptions to reward their supporters, but also withhold exemptions to punish supporters of their opponents,” Jesus Salas, an associate professor of finance at Lehigh University and one of the authors of the study, said in a statement. “The tariff exemption grant process functioned as a very effective spoils system allowing the administration of the day to reward its political friends and punish its enemies.”
As Reason has previously reported, the exemption process created when Trump hiked tariffs on a wide range of imports in 2018 allowed companies to avoid paying tariffs if they could show that a certain imported product could not be obtained from sources out
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