When Austin Ramirez learned there was a way to potentially get out of being taxed on imports during the Trump administration’s first trade war with China, he knew he had to apply.
“There are a subset of our products that we just don’t have North American alternatives for,” he said.
Ramirez’s company, Husco, is headquartered in Waukesha, Wisconsin. It makes hydraulic and electromechanical components for cars, and construction and agricultural equipment. About half the parts he needs to manufacture these goods, like iron castings, are imported from abroad.
“So these are molten metal that’s poured into a mold. You know, it solidifies and ultimately it’s machined into a final product,” said Ramirez. “It’s a fairly labor intensive, you know, not hugely environmentally friendly process, so a lot of those foundries have moved overseas.”
This was the main argument Ramirez’s lawyers used in tariff exclusion applications back in 2018 — that there was no way to source these castings in the United States. They had to outline reasoning in pages of applications for dozens of items, a process that took months.
The back-and-forth confusion of the Trump administration’s trade policy has yet to settle. But as business owners wait, they’re exploring their options. During Trump’s last term, and last trade war, one option was to apply for an exclusion. They granted businesses temporary relief from tariffs on specific imports so that, for instance, a business wouldn’t have to pay the tariffs while they transitioned supply chains. It’s unclear if there will be a formal process this time around, but if there is, and if it looks anything like it did last time, it might be a bit messy.
“I’d say probably a third to half of our exclusions were approved,” said Ramirez.
That’s higher than the average 13% approval rate through early 2020 for tariff exclusions on Chinese imports, according to the Congressional Research Service. But Ramirez said the whole process was frustrating because it was opaque.
“We couldn’t find any kind of rhyme or reason to why certain component categories were approved and why others were rejected,” he said.
Dinesh Hasija at Augusta University researched exclusions data from the 2018 tariffs on steel and aluminum imports.
“There was a lot of randomness,” he said.
It was hard to find consistent reasons why applications were denied or approved, but there were some patterns. For instance, if your supplier was in a country that had a favorable relationship with the U.S., you were more likely to be granted an exclusion.
“So the country of affiliation mattered,” he said.
So did, perhaps, a company’s political affiliations. A study in the Journal of Financial and Quantitative Analysis found businesses that made campaign contributions to the Republican Party were more likely to be granted exclusions.
Robert Friedman, who co-leads the international trade practice at law firm Holland & Knight, has been getting calls from clients for months to explore all their options when it comes to tariffs.
“This time around we were seeing companies preparing far in advance of Trump’s election,” he said.
He’s a bit skeptical there will be an exclusion process because of how wide reaching these tariffs are, and the kind of government staffing that reviewing applications would require. But however messy the tariff exclusion process was or may be, it would at least give smaller business owners a way to be heard. Friedman said no exclusion process would give more voice to bigger firms.
“The companies with greater political power have an easier time conveying their messages,” he said. “But that is unfortunately not available to many businesses.”
Ramirez of Husco, the hydraulics manufacturer, isn’t so worried about Chinese tariffs this time around. The company has reduced its imports from China by about 80%, though none of those supply chains shifted to the U.S.
“We now source in Thailand and Malaysia, and some to India, and some to Europe,” he said.
That won’t save Ramirez if Trump puts global tariffs into place, something he’s floated before.
“It is so volatile that I don’t know that anybody knows what to do,” said Ramirez.
He said he can’t create a plan until the administration solidifies its own.
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