If a conservative idealist got to write the federal tax code, the result would be low and flat rates that fund a modest government and do not punish success. Meanwhile, the liberal idealist would create high tax rates (to fund a big government), and the rates would be higher for the wealthy and for corporations (in order to redistribute wealth).
The Beltway lobbyist and lawyer hold a different ideal. To maximize their wealth and influence, they would want high tax rates, but they would also want plentiful loopholes. Even better, they would want Congress to grant broad discretion to political appointees in the administration to raise and lower rates and exempt or target certain products.
This dream setup for lobbyists is exactly what the Trump and Biden administrations have delivered with their tariff frenzies.
President-elect Donald Trump has pledged to stir up trade wars again, promising new and higher tariffs to protect U.S. manufacturers and punish misbehaving foreigners. If he delivers, or even if he just keeps promising tariffs, he will set off a bonanza of trade lobbying and lawyering and create a fertile environment for cronyism and corruption.
Trump’s tariff plans
Nobody knows what Trump will do with tariffs in his second term. We do know he likes imposing and threatening to impose them. Unlike with other taxes, the president can raise and lower tariffs unilaterally and can grant exemptions and exceptions to any tariffs he may impose.
While the Constitution clearly gives Congress the power to impose taxes, it also allows it to delegate this power to the executive. In 1962, Congress created Section 232 tariff power, allowing the president to impose tariffs for national security reasons. Twelve years later, Congress gave the president the power to retaliate against “unfair trade practices” with tariffs of his own, which are called Section 301 tariffs.
In the name of national security, Trump imposed steel and aluminum tariffs in 2018, a 25% tax on all imported steel and 10% on all imported aluminum, arguing that a strong U.S. steel and aluminum industry was needed for national defense. However, as always with tariffs, there was plenty of room for loopholes and lobbying. Section 232 established a process whereby importers could lobby to be excluded from the tariffs.
There are all sorts of reasons to exclude some goods from tariffs: imports that don’t compete with U.S. producers, imports that are necessary for national security, imports from strategic allies, et cetera.
Steel and aluminum importers (such as U.S. manufacturers) applied for tens of thousands of exclusions. Trump’s Commerce Department granted about half of them.
Trump separately imposed high retaliatory tariffs on Chinese goods (Section 301 tariffs), charging China with unfair trade practices. These were not across-the-board tariffs on all imports from China, but instead, under Section 301, the U.S. trade representative created a list of categories of goods that would be taxed.
After USTR publishes that list, U.S. companies can apply for a specific category to be excluded from the list. During the Trump years, companies made more than 20,000 exclusion requests, with about one-fourth, a bit below 5,000, of them approved.
After that, there’s more haggling, as some companies will send in lawyers to argue over what category their particular product fits into.
Here, the tale of the Snuggie is illustrative.
A Snuggie is a blanket with sleeves that is made in China. When the Snuggie company, AllStar Marketing Group, began importing its product to sell here, U.S. Customs and Border Protection labeled it as a garment. AllStar objected that its product was a blanket, not a garment.
Why did this matter? Blankets had a tariff rate of 8.5%, much less than the 14.9% tariff it would incur as a garment.
So, AllStar had to lawyer up and go to court with arguments such as the Snuggie doesn’t fasten in the back, therefore it cannot be a clothing item.
It’s not hard to imagine why tariffs and exemptions make good work for lawyers and lobbyists.
Trade wars are the health of K Street
“Amid fierce debate about how exactly Donald Trump’s proposed tariffs will affect the global economy, there’s at least one clear winner,” the Financial Times reported. “The Washington lawyers and accountants preparing to rake in a fee bonanza.”
“We are getting a lot of new clients, a lot of new people approaching us,” one trade-focused firm said.
Beyond the loopholes, exemptions, and exceptions, tariffs introduce many other opportunities for cronyism and special-interest pleading.
For instance, Trump in 2020 agreed to lower the tariffs on China in exchange for China increasing its purchases of U.S. crops (mostly this meant soy) by $200 billion over two years. Why did Trump ask China to buy soy and other crops?
Agriculture suffered from Trump’s trade war as China cut way back on important U.S. crops. Trump always liked to brag about what he did for farmers — in the 2024 Republican primaries, for instance, he stood up a group called “Farmers for Trump” that headlined his appearances in Iowa.
Trump, in his second term, might resume his demands that trade partners increase their imports of particular U.S. products. This is another way that trade wars allow Trump to pick winners and losers.
Tariffs fuel cronyism
The effect on lobbyists and lawyers is not theoretical.
Trump’s first election created a trade lobbying boom. In 2016, the lobbying disclosure database showed 921 lobbying clients whose lobbyists worked on trade matters. That climbed for the next three years to a peak of 1,419 in 2019 — more than a 50% increase. (There is no direct measure of money spent lobbying on trade.)
Trump’s closest friends were among the biggest beneficiaries. Ballard Partners is a firm with extremely tight ties to Trump — it was founded by a major Trump donor and employed Trump’s picks for attorney general and White House chief of staff.
Amazon hired Ballard as a trade lobbyist amid Trump’s trade war. Ballard picked up other trade clients, which OpenSecrets documented. The website reported in 2019 that Ballard “is representing 10 clients on trade or tariff-related issues this year, ranging from the world’s largest cruise line Carnival Corp. to the American Kitchen Cabinet Alliance, which said it lost at least $2 billion to the U.S.-China trade war and filed a lawsuit against China in March accusing the country of unfair trading.”
Trump, heading into his second term, has threatened all sorts of tariffs. Ambiguity and unpredictability give him an advantage in international negotiations, he believes. However, this same ambiguity and unpredictability also increase the lobbying and pleading from U.S. companies — those who want exemptions from tariffs and those who want protection from their foreign competitors.
Hiring politically connected lobbyists seems to work, the research suggests.
“Politicians not only use exemptions to reward their supporters but also to withhold exemptions to punish supporters of their opponents,” three scholars in a 2024 paper on Trump’s China tariffs reported.
While the steel and aluminum tariffs, under Section 232, are governed by the Commerce Department, the China tariffs, under Section 301, are governed by USTR, which is more directly under the president’s control.
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First, the researchers found that companies spending more on lobbying were more successful in obtaining exemptions. Second, they found that companies whose political action committees gave to Republicans were more likely than average to win their desired exemptions. Finally, companies whose PACs gave mostly to Democrats were less likely than average to win an exemption.
There may be no corrupt intent by the lobbyists or the USTR officials involved. However, a policy framework that imposes massive costs while granting plentiful loopholes is certainly the perfect environment for influence peddling and insider enrichment.