US companies are bracing for the fallout as Donald Trump threatens to impose steep tariffs if he returns to office this month. But an analysis of Trump’s last presidential term found that one way to increase his chances of avoiding taxes was by donating to Republicans.
The president-elect’s initial tariff policy is aimed at hurting the United States’ largest trading partners, Canada, Mexico, and China, but U.S. companies will bear the brunt of the burden and will be cut from those markets. You pay customs duties on the products you purchase. These additional costs can be devastating.
The federal government typically authorizes carefully selected groups of companies to pay such levies. During Trump’s first presidency, thousands of companies applied for exemptions and permits to import items without paying new tariffs.
An academic study of which applications were successful and which were unsuccessful found that companies were more likely to receive approval if they had made large donations to Republican campaigns. Meanwhile, the analysis found that companies that made large donations to Democratic campaigns were less likely to win approval.
“What was supposed to be an ‘arm’s length’ process was distorted by politics,” said Veliko Fotak, an associate professor at the University at Buffalo and one of the report’s co-authors.
Jesus Salas, an associate professor of finance at Lehigh University and another co-author, said tariff exemptions could provide “significant” and “long-term benefits” to companies that obtain them. He pointed out that there is. He said it was “shocking” to find that businesses were less likely to support Democrats after supporting them.
“There’s a lot of reason to think some of this behavior will continue” even after Trump returns, Salas said. He cited the appointment of Jamison Grier, who served as Chief of Staff to Trade Representative Robert Lighthizer during Trump’s first term, as the new trade representative. “It’s the same staff, and they probably think the same way, so we would expect them to behave the same way.”
During his campaign, President Trump, who described “tariffs” as “the most beautiful word in the dictionary,” argued that imposing high tariffs on foreign products would boost the U.S. economy, a claim that many economists agree with. I object. After pledging to impose flat tariffs on all foreign imports, the president-elect threatened to impose tariffs on Mexico, Canada and China, among others, after his election victory.
Salas said U.S. companies hit by the incoming Trump administration’s tariffs shouldn’t expect help if they donated to Democrats in the wake of previous events. “The problem is that politicians are involved in this process.”
The investigation examined President Trump’s request for exemption from $550 billion in tariffs imposed on China in 2018. Of 7,015 applications, 14.6% were approved.
The analysis found that companies that made large donations to Republicans had a significantly higher chance of approval, about 18.5%. Companies that made large donations to Democrats had an approximately 11.2% chance of approval.
The findings highlight how “susceptible to political distortion” the process of obtaining exemptions is, Fotak said, stressing that he is not a political scientist. “If the next administration wants to use the exemption process to reward supporters, punish opponents, and ultimately encourage donations, they are certainly in a position to do so.”
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He noted that while President Joe Biden’s administration had been “very critical of this waiver process,” “nothing has changed” since President Trump last took office.
“There will always be political uncertainty for businesses,” said Grace Lee, an associate professor at Fordham University and another co-author of the report. Donating to political parties and movements for the sake of others.
Mr. Lee was struck by how a donation that represents just a small portion of a company’s business could have a huge impact on its chances of getting a lifeline from the federal government, in this case a tariff exemption. “Although the amount of political contributions does not appear to be very important (on average, only 0.0025% of the sample’s total wealth), its effect (benefits) can be large,” she said.
Companies such as Amazon, OpenAI, and Meta, the owner of Facebook and Instagram, have lined up in recent weeks to donate millions of dollars to the president-elect’s inaugural fund.
“While we did not find that contributions made to President Trump’s first inauguration affected the likelihood of being granted an exemption, contributions to the inaugural committee did not result in tax exemptions for President Trump’s second inauguration,” Lee said. There is a possibility that the possibility of exemption will increase.” semester. “
A spokesperson for Trump’s transition team did not respond to a request for comment.
