Trumps Tariffs: A Gateway to Crony Capitalism and Unfair Market Advantages

The recent imposition of tariffs by President Trump has set the stage for a new era of crony capitalism, where select businesses are granted exemptions, giving them an unfair advantage over their competitors. The Trump administration's decision to exempt three domestic automakers, General Motors, Ford, and Stellantis, from the 25% tariffs on imports from Canada and Mexico, is a prime example of this phenomenon.

The exemption process, which allows importers to request exemptions from the government, is opaque and conceivably influenced by political favoritism. According to a 2019 report by the Peterson Institute for International Economics, the Trump administration granted about 35% of exemption requests during his first term. This arbitrary decision-making process can instantly disrupt a competitive marketplace, as seen in the case of the Detroit automakers.

The tariff exemptions granted to domestic automakers have created a significant cost advantage for them over their foreign competitors. For instance, Ford's Mustang Mach-E, assembled in Mexico, will escape the 25% import tariff, at least for a month. In contrast, Honda's ADX crossover, built in Mexico, will not receive the same exemption, putting it at a competitive disadvantage. This uneven playing field can have far-reaching consequences for the economy and the businesses operating within it.

The Trump administration's ability to offer exemptions to select businesses creates a perverse incentive for companies to curry favor with the government, rather than focusing on innovation and competitiveness. This can lead to a situation where businesses are more focused on lobbying for exemptions than on creating value for their customers. As Trump's press secretary, Karoline Leavitt, suggested, the administration is "open to hearing about additional exemptions," which could further exacerbate this problem. The use of tariffs as a tool for political leverage can have devastating consequences for the economy, as it creates uncertainty and undermines the rule of law.