In 2018, Bobby Djavaheri feared that his family’s appliance business was on the brink of collapse due to the Trump administration’s tariffs on Chinese-made air fryers.
As president of Yedi Houseware Appliances, Djavaheri consulted a customs attorney and applied for a tariff exclusion with the United States Trade Representative (USTR) to avoid the steep 25% levy on imports from China. However, like many other businesses, Yedi’s request was swiftly denied.
“They didn’t even give me an explanation,” Djavaheri recalled, noting that the decision led his Los Angeles-based company to lay off workers and cancel expansion plans. “We were on the up and up, and this just halted our growth.”
Yedi’s experience is a common one. Many U.S. businesses have sought to evade the costs imposed by the tariffs on Chinese goods, only to encounter significant challenges in navigating a complex and often opaque tariff exclusion process introduced by the Trump administration.
“The exclusion process is broken. It’s convoluted and incredibly confusing,” said Tom Madrecki, Vice President of the Consumer Brands Association, a trade group that represents major companies like Coca-Cola, General Mills, and Molson Coors.
As the U.S. braces for even higher tariffs on China under a potential second term for Trump, businesses and lawmakers remain uncertain about how or when these new tariffs will take effect—and whether companies will once again have the opportunity to apply for exclusions.
The tariff exclusion process, originally launched in 2018, has been a source of frustration, especially as businesses question whether the USTR’s decisions are influenced by political favoritism. Some believe the system has been prone to manipulation, with corporations that support certain political figures faring better in exclusion requests.
Between 2018 and 2020, the USTR received over 53,000 exclusion requests, granting just 13% of them. According to a Government Accountability Office (GAO) review, there were “inconsistencies” in the way exclusion requests were reviewed, and the process lacked full transparency. Further investigations revealed that businesses often faced contradictions in the way their applications were handled, prompting accusations of potential corruption.
A study published in the Journal of Financial and Quantitative Analysis found that companies whose executives donated to Republican candidates were more likely to win exclusions from Trump’s Section 301 tariffs. For companies supporting Republican causes, the likelihood of getting an exclusion increased to roughly one in five, compared to just one in seven for the average applicant. In contrast, companies backing Democratic candidates faced a 3.4% lower chance of success, shifting the odds to one in ten.
Researchers suggested that the tariff exclusion process appeared to reward political supporters while penalizing opponents, raising concerns of quid pro quo arrangements. “There is clear evidence of corruption,” said finance professor Jesus Salas, co-author of the study.
Salas emphasized the lack of oversight and transparency, noting the chaotic nature of the exclusion process and the inconsistencies in how applications were handled. “It’s just huge chaos for the firms,” Salas said, explaining that even identical products could result in different outcomes for different applicants.
Many businesses and lobbyists are wary of a similar outcome if the exclusion process is revisited under a new administration. Salas suggests that the current system is ripe for political distortions, and unless significant reforms are made, it could continue to benefit a select few, including lawyers and lobbyists, while undermining fairness for smaller businesses.
Under the Biden administration, officials have promised a more transparent and open process, with career staff handling requests instead of political appointees. However, critics, including researchers like Salas, argue that institutional weaknesses persist.
As the threat of new tariffs looms, the stakes for businesses are high. Winning an exclusion can mean the difference between survival and failure. According to the study, companies that won tariff exclusions gained an additional $57 billion in combined market value.
David French, Executive Vice President of Government Relations at the National Retail Federation, noted that businesses are already preparing for the potential impact of higher tariffs. Lobbying efforts are underway, and many firms are strategizing with consultants and lawyers to protect themselves from the impending costs.
For Djavaheri, the fight continues. He plans to reapply for tariff exclusions in the hopes of securing a more favorable outcome. “I have to—otherwise I’m dead,” he said. He rejected the claim that China would bear the burden of the tariffs, emphasizing that U.S. businesses have largely been the ones left to pay the price.
Bro, that’s bullsh*it,” Djavaheri said. “I’ll show you my bills. I’m getting the bills.
Leave feedback about this