(Bloomberg) — Public companies whose executives donated to Republican candidates were more likely to win exemptions from first-term President-elect Donald Trump’s tariffs on China, while those that gave to Democrats saw the odds drop, according to a study of thousands. of exemption requests.

Companies filed more than 50,000 requests for exemptions after Trump began announcing tariffs on Chinese imports in 2018, a process that requires them to submit separate requests for each product to be reviewed by officials at the Office of the Trade Representative of the USA.

The research was led by Veljko Fotak, professor of finance at the University at Buffalo School of Management. He and three co-authors pored over government records, campaign finance reports and corporate filings to study the more than 7,000 temporary rate exclusion requests filed by public companies. And when they focused on the 1,022 claims that were successful, they found that companies that donated to Republican candidates were more likely to win exemptions.

Overall, public companies that applied for exemptions from Trump’s first tariffs on China had a 14.6 percent success rate, the researchers found. But just $35,000 in donations to Republican candidates by political action committees and company executives boosted those odds by 3.9 percentage points, Fotak said. This effectively improved the odds of winning a takedown from about one in seven to one in five.

Success provided a significant return. In total, it meant an additional $57 billion in market capitalization for the firms that succeeded, researchers calculated for the peer-reviewed study, which is to be published in an upcoming issue of The Journal of Financial and Quantitative Analysis.

Donations to Democrats hurt firms’ chances of seeking exemptions during the Trump administration, according to research. A contribution of just $4,000 reduced the probability of success by 3.4 percentage points, Fotak said. This worsened the odds of success to just under one in 10.

The study does not identify individual companies. It also alleges no wrongdoing by US companies or officials.

“Completely Fake”

Stephen Vaughn, who oversaw the exclusion process as USTR’s general counsel during the Trump administration, said any suggestion of partisan bias in the process was “completely false” and was designed to be apolitical.

“Requests for exclusions were reviewed by career staff, and temporary exclusions were granted only in those limited situations where they would benefit the U.S. economy as a whole,” he said. “The nonpartisan validity of these exclusions is demonstrated by the fact that, as of March 2022, most of the exclusions that were set to expire were reinstated or extended by the Biden administration.”

The research paper, a draft of which was released online in July, has added relevance as Trump prepares to return to the White House in January, pledging to impose tariffs of 60 percent and possibly more on Chinese imports. It is not yet clear how he will fulfill the campaign promise and whether or not there will be an exclusionary process.

“There’s a lot of uncertainty, but the more I continue to see what happens with the new administration, the more I think it’s going to be more of the same,” said Jesus Salas, a finance professor at Lehigh University who has collaborated with Fotak to research.

Lobby links

Fotak, Salas and their co-authors also looked at the role of lobbyists, and particularly those lobbying firms that included former Trump administration officials. They found that hiring connected lobbyists helped. So did the donation of senators appointed to influential panels such as the Senate Finance Committee.

The Biden administration has maintained tariffs on Chinese imports and in October announced a similar carve-out process for new tariffs on Chinese electric vehicles and other products it announced earlier this year. As of Wednesday, however, only 59 applications had been submitted by companies and no decisions had been made, making it difficult to examine any results, Fotak said.

There was a lot of criticism of the previous tariff exclusion process during the Trump administration, which drew complaints that it was slow and unpredictable.

When Trump first imposed tariffs on Chinese imports, large US companies and small farmers alike were caught off guard and forced to navigate a new bureaucratic process. The exclusion criteria were broad and included whether or not the products were available in another country or were produced by an industrial sector prioritized for development by the Chinese leadership’s Made in China 2025 program.

Trump’s next round of tariffs, however, will run into a well-oiled lobbying and legal machine in Washington that has plenty of practice with the tariff exclusion process.

“This time, the lobbyists are ready,” Fotak said.

©2024 Bloomberg LP