A (2:13)

So I think the important thing to note from the Supreme Court's ruling is that he is not allowed to impose any tariffs using ipa. So the Supreme Court found that the tariffs were a tax and that taxing power is firmly vested in Congress and The statute didn't clearly authorize him to impose tariffs. The regulate import language that, that language regulate has never been used to, to, to confer power to tax. So they said Congress didn't do that here. So what that means is that any tariffs he's imposed using IPA are probably going to be struck. So the tariffs on India and Brazil are probably going to be struck as well. I think with respect to section one, the 122 tariffs, I think he's probably on good legal footing there because that's the terror, that's the statute that the low he should have used to address trade imbalances. And what that statute allows him to do is to impose a 15% tariff for 150 days if there's a serious balance of payments deficit. And the court went into length, the lower court went into great length to explain why they think a trade imbalance falls under that definition, a serious balance of payments issue. So I think he's on good legal footing there. It can be challenged if, for example, you know, people are saying what's happening, what exists in the world now is not a serious balance of payments issue. But the statute doesn't say who has discretion to determine that. And I don't think courts are going to be too inclined to second guess the President's determination. So that's what I think about section 122. I think the waffling, though, where, you know, he put, he imposed it the executive order and said his advisors say a 10% tariff is necessary. And then he comes out the next day and says actually no 15%. I think that makes it a little bit shakier because it doesn't seem justified. But I think, you know, he, he probably will put out another executive order, probably on February 24th, I'm expecting. And if he, if he further clarifies why the 15% tariff is necessary, I think that will ultimately be upheld.

B (4:30)

So, you know, just to, we had a question in here. You know, you expect the legality of the 122 tariffs to be challenged and I think from your answer, it's no.

A (4:40)

Well, it could be challenged. It could be challenged, but I don't think a challenge would succeed.

B (4:44)

Okay. Yeah. And I would also just say because I've gotten a similar question on the congressional side, you know, will you see Congress? Because the 122 only goes for 150 days until you need congressional authorization. I don't anticipate we'll ever see Congress have to opine on this for two reasons. One is, and this is where I'm going with my next question is to explain what 232 and 301 is and whether or not President Trump will then transfer these tariffs from 122 to those other statutes. And secondly, I think Republicans will just say, look, there is a, they're going to look at the political reality here of President Trump's actions and they'll say, look, we don't need to have authorization on this. So, you know, that being said, you know, if my theory is correct, the one that we've been floating around is that, you know, President Trump will then go from 122 to 301. Can you explain the difference between 232 and 301? And when President Trump just said just minutes ago that nations that, quote, play games with the United States and I think he's referring to the European Union here because we saw reporting from just this morning that the European Union has paused negotiations or paused its ratification of the trade deal. You know, what does he mean by playing games here?

A (5:57)

Okay, well, with respect to 201, 301, he's allowed to impose tariffs if he finds a country isn't honoring trade agreements or is treating America or is discriminating against U. S Commerce. He's used this before in 2018 against China on 300 over $300 billion worth of goods from China when he said that they were violating trade agreements with respect to intellectual property. Now, with regard to 232, that is a tariff, that, that's a statute that allows the president to impose tariffs if he, if imports threaten to impair national security. So he can use this statute, but he can't, he probably can't use it on a countrywide basis. It probably has to be sector specific. So you've seen him use it on autos, for example, steel and aluminum. Both of these require investigations. 301 requires an investigation by U.S. trade Rep. And 232 requires an investigation by the Department of Commerce. But he's already begun some of those investigations. So, you know, it's not like a clean slate with respect to all tariffs that he could impose via 301 and 232, he started some investigations already so that those could be, you know, on the horizon. But with regard to, you know, playing games in the EU trade deal, the EU trade deal, I believe it was at, I believe it was at 10%. And so the increase to 15% is something that they won't accept. The question is whether if they say that they won't accept anything now like a 10% or 15%. Well, you know, if they want to accept the 10% that they previously agreed to. The question is, does the President have legal authority under section 301 to say they're not honoring trade agreements? And it's not clear because the trade agreement was entered into under section under the IPA statute, which the Supreme Court says is unlawful. So arguably there's no legal basis for that trade agreement. Congress hasn't approved it. That's another reason why it could be suspect and may not be subject to 301 tariffs. But with regard to section 122, he could still impose the 15% tariff.

B (8:24)

Gotcha. Okay, we had a couple of questions come in and I actually think the easiest way for me to answer some of these questions is to share my screen and show you an analysis that Bloomberg Economics put out. So if you just bear with me for one second. These are from our friends over at Bloomberg Economics. Let me go ahead and hide that. Sorry, Let me get that. Okay, everybody can see my screen. Thank you very much. So you know, section 122 plan falls short of replacing IEIPA. You know, we see here 2024, we see the pre ruling section 122 IPA tariffs and then if you go to the section 122 IIPA replacement plan, you can see that the effective US tariff rate has decreased slightly because of the pre ruling versus the 10% or just the 15% ruling. And for those of you who are on the Bloomberg Balance of Power podcast, I just realized you can't see this screen. So that if you do feel that you need to see this charts, please feel free to come back. We will actually be happy to show this to you. I apologize that we're doing this for the moment. And then if you come down just a little bit and we for those of you on the terminal, just ping me. The analyst who's leading this is Nicole Gorton Carratelli over at Bloomberg Economics. Feel free to reach out to her. Feel free to reach out to me. I will make sure that you get this insight into your, into your inbox. But you can see here on a country by basis we have the pre ruling which is the white DOT, the Section 122 AIPA replacement plan which is the yellow dot and then the, or the Bloomberg orange dot and then we have the 15%. So you can see in some cases, obviously there was some increases in some cases in China, there's a significant decrease here. And so I think this is a lot of the information that's going to be played out over the next couple weeks because there are winners and losers to President Trump's plan here. So I'm going ahead, stop my sharing, come back and just check the questions real quick. You know, Holly, there was a question about legal challenges to the new tariffs. You know, could courts pause their implementation, unlike what we saw through IPA

A (10:30)

with regard to the 122 tariffs?

B (10:32)

Well, yeah, I think there was one.

A (10:34)

I don't think they do that because they didn't do that with the IPA tariffs, even though, even when they ruled that they were unlawful. So the lower court said they're unlawful. But we're going to stay our ruling until this goes all the way up. And, and the Federal Circuit did the same thing. We find this unlawful. But the ruling was stayed. The Supreme Court stayed. Stayed application, the Federal Circuit's ruling, until they ruled. So even when you have a challenge that's successful, they stayed it until the Supreme Court could rule. So I don't think, I don't foresee that happening.

B (11:08)

Okay. No, that sounds good. Let me just make sure, you know, and what would you think? You know, another question came in is like, would he be able to keep the average tariff rate around that 15% level once the 122 tariffs expire? What's the, what's the limit on 301?

A (11:25)

There is no limit on 301, but he'd have to find every country that he imposed this 15% tariff on, or his U.S. trade rep would have to find every country that he's used 15 against, has discriminated against US commerce or violated a trade agreement.

B (11:42)

Okay, so. And that would come through a notice, some comment period, or at least the investigations go via a notice in Commentary. Correct. And, but investigations have already started. I just want to clarify. So for the folks listening, investigation. So 122 only goes for 150 days. We don't anticipate congressional authorization. They have already started Investigations on. Via 301. Correct, right.

A (12:06)

On China.

B (12:08)

On China. But what about, like, let's just say I'm going to just pluck out Argentina because I had Jimmy Cherry this past weekend. You know, if there was an investigation in Argentina, would they have to do a separate notice and period, comment period for that? Or could they lump that in with something else?

A (12:23)

I don't know that there's any existing investigation that they could lump that in with, but you could see all the investigations that they've done that they've opened, and that's on The, I think it's a business industries webpage. It's a, it's a division of the Department of Commerce. So you can see all the ones that have been open. I don't think there's one that they could lump Argentina into. But so, so if, if it was an investigation that, you know, it's a, it's a new issue, they'd probably have to open a new investigation for that.

B (12:57)

Okay. So it's not one of those situations where they can just blanket, you know, there's got to be an investigation. And, and I guess that brings some clarity to the markets because, like, you know, yes, I'm not going to say that there's clarity post this ruling, but if we at least know that there has to be a notification period for an investigation, we can at least go back and say, here are the investigations that are taking place here, the ones that aren't taking place. And, you know, we can, you know, at least try and get some ideas there. So. Okay, Holly, last question I have for you is, let's talk about refunds. You know, the court didn't address refunds. You know, Treasury Secretary Scott Besant said, look, you know, and I'm paraphrasing here, you know, refunds aren't really in the cards right now. How is this refund chaos going to play it out? I presume it would have to go back down to a lower court and somebody would have to sue to get that refund. Am I right?

A (13:49)

So that's probably what's going to happen. They can try to apply to the customs agency, but if the customs agency doesn't refund their money, then they would have to go to the court. And so typically so, and so they think there, there is this existing case that's been filed by a bunch of companies. They were consolidated into one lawsuit before the International Trade Court, and that may be the vehicle that the court uses to explain how these refunds should be sought and, and what procedures are necessary. But there was this thinking that they may just use the old procedure, which is the procedure used for challenging any duty that they think that you think is, was wrongfully paid. So there's a procedure whereby the importer, when the importer enters goods or imports goods on the date of entry, they have to say to the customs agency what they think these good, what they think the right amount to pay is. And so that's based on what the classification of the goods are, what the duty rate is. And within 314 days of entry, the customs agency decides whether that that was the right amount or not, whether they owe more. And that's called liquidation. And when that's finalized, when the duties liquidate, it's called the, the amount is finalized by the customs agency, the amount they owe. The importer then has 180 days to challenge that. It's called by, by, by, via a protest. And so they think, they're thinking that they're going to have to do something like that. So they're going to have to file some kind of, you know, application procedure and say we paid this, we shouldn't have paid it and see if customs remits. And if they don't, then they would probably have to file a lawsuit. So just to summarize, so some lawyers are recommending to their clients, you know, do both because there are these deadlines and they don't want the deadlines to expire. So do both apply to customs agency and file a lawsuit. And some of them recommended they do that before the Supreme Court even rules because some of the deadlines are passing.

B (16:07)

So what I'm hearing for you is that if you're a trade lawyer who's about refund litigation or Section 301, you're probably going to have really good job security for the next three years, I'm guessing, because it sounds like all this is just headed to the courts.

A (16:20)

Yeah, we're, there's definitely going to be like litigation that. Well, not definitely, but I think there's going to be litigation that arises out of this.

B (16:27)

So. Okay, sounds good. Thank you, Holly. I don't see any more questions about tariffs. We do have a webinar Tomorrow at 10am Eastern that is going to have, Holly, our friends from Bloomberg Economics, the Nicole who wrote that piece on the countries. We're also going to have other analysts talking about the sectors like retail and technology. So if you do want to attend that webinar, just feel free to reach out to me. I'll make sure that you get that Link that's at 10am Eastern. And if you missed that, there is going to be a replay. But Holly, thank you very much for joining. I know you got a busy day, so I'll let you go and then I'll just talk about State of the Union and then we will let everybody get back to their day jobs. So. So State of the Union, there are really, I think, three themes that we're going to see tomorrow. This is tomorrow night around 8pm Eastern. Obviously, President Trump's going to come in. He's going to address Congress, the Supreme Court's going to be there. Kelshi already has on the betting markets. Is he going to shake John Roberts hand or not? Right now the, the nos have it. I didn't look at the number, but the nos are saying that they think President Trump's not going to shake his hand. But anyway, there's three themes that I think you should keep in mind. One is geopolitical. Let me get this right. There we go. One is geopolitical. Obviously, the question about Iran. Now, I'm not going to talk about this because obviously I focus on US Domestic policy. But again, my friends over at Bloomberg Economics have a great piece of scenario analys of what could come out. Now, President Trump has been at least according to Bloomberg News. The latest from Bloomberg News is that President Trump was thinking about a limited strike on Iran. The negotiations are scheduled for Thursday. And then you would have a much more intense strike, sometimes later if negotiations falter and so forth. But again, that's the Bloomberg News. But if you do need a geopolitical analyst to discuss this in greater detail, please let me know and we'll get you in touch with Jenny and her team. Now, the two domestic themes that you're going to hear is one is my colleague Duane Wright put in a great note on healthcare, you know, talking about changes to the Affordable Care Act. Now, the reason why there's going to be talks about the Affordable Care act is because Republicans are talking about another bite of the apple via reconciliation. Now, this is think of one big beautiful bill, part two. And this is the process that allows Republicans to do it once per fiscal year. You avoid the Senate filibuster. So majority vote in the House, majority vote in the Senate. Now, there are a lot of healthcare changes have been discussed about this, tax changes, things about, you know, increasing home builders, you know, decreasing taxes associated with home building. But also just recently, in light of Friday's ruling, you have some Republicans out there saying that they should reinstitute tariff authority via IPA via reconciliation. All you need to know is that if President Trump talks about things last night or tomorrow night regarding that require legislative change. If it's via reconciliation, we have a 20% chance of that happening this year. The votes just aren't there. You can't get the House of Representatives aligned when you only have a margin of one. And when you have certain Republicans out there who are just pretty much at the point where they're not on board with the president's agenda, it just doesn't seem like it's going to happen. So whether it's for terrifying authority or maybe some of the health care changes, et cetera. But again, if you need a copy of Dwayne's note, please let me know. The third thing you're going to hear about tomorrow is in addition to tariffs, which we already discussed, but the third thing you'll hear about tomorrow is affordability. Now, President Trump is going to make a lot of repeat statements of what he said over the last couple of weeks. He'll probably call for a credit card interest rate cap, probably call for the banning of corporation purchases of single family homes. But the story here is that if it requires an active legislation, it's very difficult to come by. Even that corporation ban, there's bipartisan warmth. And out of all the things that he said, that's probably the one that's going to drive the most headlines. Because this week you are going to see the Senate work on housing reform and the White House is pressuring to get that attached as an amendment to the housing bill. I don't think it's going to work, but again, that's something that we're going to keep an eye on. Where I'm going with this is is that tomorrow on affordability, you're going to hear a lot of statements about it. It's going to lead to a lot of headline risk. But think of this. If it requires an act of legislation, it's probably not likely to happen. And if it requires regulation, it's a new idea. It's going to be quarters years to happen. And if it requires the executive order, then it's either going to be tested in the courts or he's going to try and do it via the bully pulpit. And that's most likely what you're going to see here is President Trump trying to use the bully pulpit. Think of things like, you know, pressuring these banks to issue these credit cards. Or just over the weekend, he was pressuring Netflix over, you know, Susan Rice, one of their board members. So the bully pulpit is what most likely is the thing to keep in mind for the State of the Union address. So I apologize that we've gone a little bit longer, but, you know, we've got a lot going on. I know this was really quick. So if you do any need any deeper dive conversations, please feel free to reach out again. My email is ndean10bloomberg.net be very much happy to have a conversation with you again. All of this here is available for you on the Bloomberg Terminal. Stay safe, stay warm, and we will talk to you soon. Thank you very much.

C (21:19)

Our thanks to Nathan Dean, Bloomberg Intelligence Senior Policy Analyst, bringing you the latest installment of his weekly Washington Policy Pulse. For more from BI or to join this call live each week, you can email nathan nathan@ndeanloomberg.net that's n d e a n bloomberg.net and come back to the podcast later today for the latest edition of Balance of Power. At Oppenheimer we're proven because we're grounded in discipline. For 145 years we've been building and protecting wealth through every market cycle with precision, clarity and the courage to think boldly beyond the moment. This is what market tested legacy looks like for this generation and the next. Put the power of Oppenheimer thinking to work for you. Wealth Management Capital Markets Investment Banking

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