Opinion
With President Trump’s tariffs now set to exact a price from thousands of businesses, the stage is set for the next act in the drama: special favors exempting certain applicants from the punishment, giving them an advantage over less-lucky competitors.
Just one day after enacting new 25% tariffs on most imports from Canada and Mexico, the Trump administration said it is giving a one-month exemption to three domestic automakers, General Motors, Ford, and Stellantis. That means vehicles they make at plants in Mexico and Canada and import to the United States won’t be subject to the tariffs right away, provided those vehicles comply with certain domestic content rules.
That might sound like a sensible grace period for an important industry likely to get hammered by the new tariffs. It could also forestall price hikes on imported vehicles that could range from $4,000 to $12,000.
Read more: What Trump's tariffs mean for the economy and your wallet
But this exemption process, which Trump used extensively when he imposed tariffs during his first term, games the system in favor of whoever is able to sway the rule makers.
“The exemption process is opaque and conceivably could be influenced by political favoritism,” the Peterson Institute for International Economics explained in a 2019 report on the tariffs Trump imposed during his first term. “Decisions to grant or deny exemptions are not explained, yet outcomes give real money to the lucky applicants and take real money from the unlucky.”
The tariff process allows importers to ask the government for exemptions, and the 2019 Peterson analysis found that the first Trump administration granted about 35% of the requests. Reports from back then highlighted confounded executives trying to figure out how the exemption process worked and hiring trade specialists who might have some sway with Trump’s trade mandarins.
According to the analytics tool QuantGov, the tariffs Trump levied against China during his first term generated more than 52,000 exemption requests. The Trump administration granted about 6,400 of them.
A similar analysis found that the steel and aluminum tariffs Trump imposed in 2018 generated 72,771 exemption requests. The Trump administration granted about half of those requests, or more than 35,000.
Trump’s latest exclusion for the Detroit automakers demonstrates how an arbitrary government decision can instantly disrupt a competitive marketplace.
Most of the foreign automakers that sell cars in the United States have factories here — and build some of their models in America. Some of them also have factories in Mexico and Canada, where they build cars that get sold in the United States. But Trump (so far) hasn’t offered those automatkers any tariff exemptions.