Unlock stock picks and a broker-level newsfeed that powers Wall Street.Upgrade Now
Tariff Threats Lead to Lobbyists Pushing for Exclusions
Kate Nishimura
8 min read
Tariff terror has gripped the industry, and fashion firms might be in for an even greater economic burden than they anticipated.
It’s no secret that President Donald Trump’s preeminent economic and trade policy, which relies on taxing imports from nations across the globe, will create ripple effects across supply chains. American companies trading in footwear, apparel and textiles saw this firsthand during his first term in office, when he imposed Section 301 duties on about $550 billion in China-made goods.
At the time, brands and retailers worked with upstream overseas suppliers, manufacturers, transportation players and logistics providers to spread out the costs of those duties to avoid passing them along to the end consumer. And many were forced to contend with a process altogether new to them: filing for tariff exemptions.
According to Judge Glock, director of research and a senior fellow at the Manhattan Institute, Trump’s tariffs ushered in a wave of trade-focused lobbyists whose job was to convince Washington, D.C. bureaucrats that their clients required duty-free access for essential products and inputs. Eight years into what has become a 21st-Century tariff renaissance now sustained by two presidential administrations, lobbyists are again on the receiving end of pleas—and payments—from firms desperate to stave off a new round of duties.
“Economists tend to be against tariffs not only because they prevent trade and raise prices, but because they increase what the discipline calls ‘rent-seeking’”—the leveraging of money and influence to get special favors from government, Glock wrote in a recent op-ed.
The history of tariffs in the United States
“The U.S. was basically at an anti-free-trade consensus from the Civil War all the way up to World War II, and that was pretty constant,” Glock told Sourcing Journal. While Republicans have painted themselves as the party of free trade in more recent decades (President George W. Bush, the late Senator John McCain and former Senator Mitt Romney all campaigned on free-trade platforms), the two parties flip-flopped on the issue throughout the 20th Century.
Tariffs, once a critical source of federal income, fell out of favor during the mid-1940s. “What happened in World War II is that the U.S. manufacturing sector became overwhelmingly dominant, because the rest of the world had been turned into piles of rubble,” Glock said. “We felt ourselves very confident that we could export anywhere else on Earth, and so the U.S., kind of by default, became an ardent free trader.”
The U.S. led negotiations on the General Agreement on Tariffs and Trade (GATT), a precursor to the World Trade Organization (WTO), in 1947, reducing trade barriers between nations across the globe. The 1962 U.S. Trade Expansion Act, negotiated by President John F. Kennedy, authorized the U.S. government to negotiate tariff cuts of up to 50 percent, and a subsequent round of negotiations on GATT led to further reductions in customs duties across more than 60 countries.
Tariffs decreased over the ensuing decades, to a point where the term was scarcely a part of public-facing governmental discourse. Prior to 2018, duties impacted just 1 percent to 3 percent of imports, Glock said, “so this was not a massive burden for a lot of importers.” Until recently, free-trade agreements guaranteed duty-free treatment for most products—but that all stands to change at a moment’s notice.
Lobbying pays off
“The textile industry bears a massively disproportionate burden” when it comes to tariffs; about one-third of all import duties are levied on goods related to textiles and apparel, whether it’s finished goods, inputs or machinery used in production,” Glock said. “That’s substantial.”
When President Trump levied Section 301 tariffs on China in 2018, the administration hastily set up an exclusion process—a “relatively new” mechanism, given that tariffs weren’t a trade tool leveraged much by recent administrations. The duties “marked a sharp departure from the system before,” Glock added. “A lot of companies were going to get caught up in the mix, and could be very seriously damaged if their particular import product was hit.”
Exclusion requests “were basically created during the Trump administration’s first round, when they realized the tariffs were so extensive and so sudden that a lot of people were going to be cut off” from their overseas supply.
Governmental bureaucracy is unfamiliar territory for most fashion firms, and coming up against a new, confusing and somewhat opaque process for getting their imports excepted from steep duties proved intimidating for many, especially small and medium-sized businesses. In large part, it’s been the bigger players that have been able to shell out to make their voices heard on The Hill.
“You’ve seen a gradual uptick since the first Trump administration in general in lobbying on tariffs and foreign trade,” Glock said. “It’s now substantially more important. So this is a boom time for lobbyists who are willing to get into the nitty gritty on trade, gladhand and help bring more attention to an issue inside the bureaucracy or in Congress.”
According to OpenSecrets.org, a D.C.-based non-profit that tracks and publishes data on campaign finance and lobbying, 1,119 “clients” or business entities lobbied on trade issues in 2024, including some of the world’s biggest brands and retailers.
Nike, for example, spent $930,000 on total lobbying expenditures last year. Meanwhile, Amazon and all its subsidiaries spent a grand total of $14.2 million, Walmart spent $5.78 million, Gap Inc. spent $470,000, and Target Corp. spent $1.2 million.
American brands aren’t the only ones bending the ears of legislators through paid lobbying. China’s Alibaba Group spent $1.7 million on lobbying efforts, while Shein doled out $2.9 million.
“Like any of these bureaucratic processes, if you look at them from the outside, there are standards and procedures that have to be carried out,” Glock said of filing for tariff exemptions. “But at the end of that procedure is some individual bureaucrat who stamps yes or no on the piece of paper… and he’s listening if there’s a Congressman or Congresswoman particularly interested in one company or another.”
Naturally, firms with more lobbying firepower can engender more support from movers and shakers than those who lack the resources to hire advocates, he added. “Since tariffs can be a life-or-death matter for many companies, lobbying around them takes on a life-or-death quality,” he wrote in his op-ed.
There’s evidence showing that rent-seeking pays off. A study by the peer-reviewed Journal of Financial and Quantitative Analysis assessed 7,015 tariff exemption applications filed with the U.S. Trade Representative on products subject to the Section 301 duties. Along with lobbying insights gleaned from OpenSecrets and data from market information database Compustat, the information was used to determine whether lobbying and campaign donations played a part in moving along the tariff exemption process.
Researchers discovered that about one in every seven applications for a tariff exemption was ultimately approved, and a one-standard-deviation increase in lobbying expenditures enhanced approval chances by 2.15 percentage points. Notably, firms that donated to Republican candidates via Political Action Committees (PACs) saw better odds; a one-standard-deviation increase in contributions raised their chances of tariff exemption approval by 3.94 percent. By contrast, the same increase in contributions to Democratic PACs actually lowered approval odds by 3.4 percent.
“Our findings linking contributions to the party in power to a higher chance of approval and contributions to the opposition to a lower chance are strongly indicative of quid pro quo arrangements,” Jesus Salas, associate professor of finance at Lehigh University and one of the study’s authors, wrote.
The research also showed that “politicians not only use exemptions to reward their supporters, but also withhold exemptions to punish supporters of their opponents,” Salas added. “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.”
According to data from the Government Accountability Office (GAO), about 53,000 exclusion requests were filed for Chinese imports covered by Section 301 tariffs from 2018 through 2020. With new tariffs in place for China and perhaps on the way for Mexico and Canada, that number is likely to balloon over the coming months.
“This extensive exclusion process… gives rise to exactly the sort of rent-seeking one would imagine,” Glock said. From the fashion firms paying for lobbyists, to the ones who can’t afford to do so (and therefore have to eat the cost of the new tariffs), to the end consumer who sees higher prices at retail, “It’s a net cost for everybody,” he added.
This article is part of SJ’s Sourcing Report. To download the entire report, click here.
