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- [00:01]
Preet Bharara
Support for the show comes from vcx, the public ticker for private tech. The US Stock market started history's greatest wave of wealth creation. From factory workers in Detroit to farmers in Omaha, anyone could own a piece of the great American companies. But today, our most innovative companies are staying private longer, which means everyday Americans are missing out. Until now. Introducing VCX, a public ticker for private tech. Visit getvcx.com for more info. That's getvcx.com carefully consider the investment materials before investing, including objectives, risk charges and expenses. This and other information can be found in the funds prospectus@getvcx.com this is a paid sponsorship.
- [00:45]
Ryan Peterson
For a lot of Americans, credit card
- [00:47]
Peter Harrell
debt feels like a fact of life. I think it's just important for people to understand how credit can work for you or against you, why that little piece of plastic has so much power.
- [01:01]
Ed Elson
That's this week on Explain It To Me.
- [01:03]
Ryan Peterson
Find new episodes Sundays Wherever you get your podcasts.
- [01:13]
Preet Bharara
When the political winds change, will there be accountability for those who bent the knee for the Trump administration?
- [01:19]
Peter Harrell
If these corporations think that the Democrats, when they come back in power, are going to play by the old rules and say, oh, never mind, we'll forgive you, I think they've got another thing coming.
- [01:30]
Preet Bharara
I'm Preet Bharara, and this week Ambassador Susan Rice joins me to discuss leadership, decision making and the state of the rule of law in America. The episode is out now. Search and follow Stay tuned with Preet wherever you get your podcasts.
- [01:47]
Ed Elson
Today's number 4208. That's how many miles FBI Director Kash Patel traveled to watch the hockey final at the Winter olympics last week. Mr. Patel drew criticism after he was seen chugging beers in the locker room. But to be fair to him, the best thing after a long week of protecting pedophiles is an ice cold beer.
- [02:14]
Ryan Peterson
Money markets matter.
- [02:15]
Peter Harrell
If money is evil, then that building is hell.
- [02:18]
Ryan Peterson
The show goes on.
- [02:22]
Peter Harrell
Sell.
- [02:24]
Ed Elson
Welcome to Property Markets. I'm Ed elson. It is February 24th. Let's check in on yesterday's market vitals. The major indices fell after tariff uncertainty resurfaced. Renewed jitters also rattled investors. Software companies were hit especially hard after a viral post from Citrini Research reignited concerns about AI's impact on the economy. Meanwhile, bitcoin continued to slide, and gold and silver both rose. Okay, what else is happening? For a fleeting moment, it looked like the courts had put an end to Trump's tariffs. In a 6, 3 ruling on Friday, the Supreme Court decided that Trump can't use emergency powers to impose sweeping tariffs. Stocks and treasury yields rose on the news. Trump then called the decision, quote, ridiculous and extraordinarily anti American. And then he moved to Plan B. Within hours of the ruling, he announced a blanket 10% tariff on all imports. And then he said he'd bump it up to 15% on Saturday. This time he's leaning on Section 122 of the Trade act of 1974, which gives the president authority to restrict imports for up to 150 days. Stocks gave back their gains on Monday as investors digested the whiplash. So many important questions remain. What exactly has changed here? What will happen with tariff refunds? Will consumers and small businesses get any relief? Lots of questions here. To help us answer some of these, we have a panel of experts today. We've got Peter Harrell, visiting scholar at the Institute of International Economic Law at Georgetown Law School, and also Ryan Peterson, CEO of Flexport. Peter Ryan, thank you very much for joining us on Prof. G Markets. Peter, we will start with you. A lot has happened over the past three days. Give us your initial reactions to the Supreme Court's ruling and also Trump's reaction to the ruling.
- [04:23]
Peter Harrell
Yeah, so we got the Supreme Court decision on Friday. I don't think the Supreme Court decision really came as a surprise. For those of us who had listened to the Supreme Court hearing back in November, it had seemed like a majority of the justices were skeptical of Trump using this 1970s era emergency powers law for his tariffs. So not really a surprise there. You could also tell the administration wasn't really surprised because while Trump obviously denounced the Supreme Court with his characteristic bravado, the administration was also quite ready to go with their backup plans. As you alluded to. Within hours of the Supreme Court ruling, Trump had signed a proclamation using this other statute, also from the 1970s, to impose a 10% tariff. He said on Saturday that he would increase that to 15%, although as of Monday afternoon he's not done so. So I do think we have to see if he in fact increases it to 15%. It probably will, but we haven't actually seen that yet. That that action, that what's called 122 Action, will keep this either 10 or 15% tariff in place through late July. He can't use that statute for more than 150 days. And so the other thing we're seeing is the administration begin to spin the wheels on some still other tariff laws that could keep tariffs in place once the 122action expires in Late July.
- [05:50]
Ed Elson
So you mentioned that he puts the 10% tariff in place. That's happened. Then he says we're going to go to 15%. But that hasn't quite happened. Maybe it will have happened by the time this has. Ryan, I was looking at your X account. You actually predicted that he would bump it up to 15%. Before he said he was going to do that. You said that he's, he's, he's got it at 10%. And then he said, I predict that he's going to move it up to 15%. You also made another prediction that we'll get to. Why did you say that and do you think it will still happen?
- [06:23]
Ryan Peterson
Well, 15% is the maximum of what he can do. And so you figure he has it in the back pocket, left himself a little cushion to add some more later. And I wasn't expecting him to pull the trigger as fast as he did. I thought he'd wait a week until in my prediction, I said Canada is going to do something to piss him off and then he's going to do it. But turned out America beat Canada in the hockey game. I thought that would be the funniest thing that could happen is if Canada beat us. And then he said, all right, here's some more terrorists for you.
- [06:50]
Ed Elson
But the other prediction you said, you wrote, quote, 150 days from now the tariffs will be paused for 15 minutes and then immediately reinstated for another 150 days. And this goes back to what Peter was mentioning here, that there is this 150 day timeframe and that's what's legal. You say he's just going to cancel and renew, take us through that.
- [07:12]
Ryan Peterson
I like to hear Peter's take on that and other people too. I'm not a lawyer and there's nothing explicitly in the law that says it says you can't extend it beyond 150 without Congress's approval. But if you let it expire and then put a new one, then surely it would get challenged. He might lose the case. But. But he could do it. I don't know. What do you think, Peter?
- [07:29]
Peter Harrell
There's one question about how do I think the courts are going to interpret the law, which is not really the question of what Trump will do. Right. Because Trump's going to do what Trump's going to do. Well, I actually feel pretty confident that if Trump tries this strategy of 150 days, expires for 15 minutes, another 150 days, the courts will throw that out. Now, it might take them a couple of months to throw that out. So Trump might, you know, get another couple of months of you before the courts throw it out. But I think the courts would throw that out.
- [07:58]
Ryan Peterson
It's kind of an interesting thing here of like, you know, even with ipa, even if you knew it was going to get thrown out and you knew you'd lose the Supreme Court case on Friday, he still got quite a lot of leverage from putting it in. I mean, he got all kinds of countries to come and make a trade deal with him. Most of those countries are not going to undo the duties that they, they dropped their tariff rates or lowered other barriers, and they, they're not going to, they're probably not going to just turn around right now and drop it. It's sort of interesting to think of, like, what are the rewards that Trump gets even from effectively what he did was break the law. So it's interesting to think about, well,
- [08:32]
Ed Elson
what do you think this, this does mean for other countries, Peter, in terms of, I mean, they came up with these sort of semi deals. They're more kind of spoken word agreements, and then everyone puts their tariffs in place. If you're a foreign government, if you're, say, Brazil or you're China or the UK or whatever, do you react to this news? Do you decide, okay, I guess we're taking the tariffs down, or do you react to the 10% or the 15? Like, what does this mean if you're a foreign government?
- [09:02]
Peter Harrell
Well, the first thing I would say, and I said this last year, that in 2025, the biggest true winners of Trump's trade war are the trade lawyers. I think it is going to be true in 2026 as well, that the trade lawyers will be the one true class of winners. And so I think what you're seeing right now is the foreign governments are talking to a bunch of very expensive trade lawyers to try to understand what's going on and what they should do to game this out. Look, the question in some sense is in Trump's court in the following way. I think that if you are Europe or you are Japan or you are one of these other countries that has a trade deal, if it looks like Trump is going to keep your tariff rate at the rate that was agreed to or lower, right? If you'd agreed to a 15% rate, if it's going to be a 15% rate or lower, I think you keep honoring the deal, right, because you don't want to piss Trump off. He might sanction you. He might, you know, who knows what he's going to do. Right. So I think you keep honoring.
- [10:03]
Ryan Peterson
He has these other levers. He could put section 32, section 301. He has other things he can go do.
- [10:08]
Peter Harrell
Totally. So I think you stick to it. Now, if what Trump does is use this as an opportunity to somehow hike rates. Like if you have, if you were at a deal, if you're the UK and you have a 10%, you know, rate in your deal, and he's now hiking that to 15, I think that becomes a little more complicated. A question for you, but if Trump plans to keep the rates the same, I think most countries will basically continue along.
- [10:33]
Ed Elson
Ryan, you kind of have the most direct line of communication with the businesses that are dealing with this because you're operating the logistics as they trade goods around the world. What are businesses and companies doing about this, if anything, in the same way that maybe there's a question for foreign governments, do we react? Are you finding that companies are reacting to this news?
- [10:56]
Ryan Peterson
Well, it's a bit of a popping of champagne that's happening right now. People are expecting to get refunds. I expect to get refunds. A lot of the, a lot of the trade attorneys and advisory folks are a little bit hesitant to just say something. I don't know.
- [11:10]
Peter Harrell
Yeah, you're going to get a refund. It might take you a couple of months, but you're going to get a refund here.
- [11:14]
Ryan Peterson
Right, Good. He's on my side. That's why it's obvious. You just read it. You read the, you read the motion that DOJ filed in the appellate court, and it's just like, we will give refunds if we lose this case. You're like, okay, great, now you're going to, you're going to give refunds. Trump says they're going to fight it. It's going to get litigated. Surely that's true. But, like, they got to lose the case. It seems like a slam dunk.
- [11:33]
Ed Elson
How does that work? How does the refund process actually work?
- [11:36]
Ryan Peterson
Right. So there's, there's a fair amount of uncertainty there. What we do know is under, under the customs regs, you basically have the, a maximum of 494 days after a customs entry is filed to do what's called a file a protest. And you it once and that's the maximum. It could actually be less. So you want to get these things filed sooner than that. And you see, you're going to have to go back and file protests on all the entries that you did that had IPA tariffs. And so actually the first IPA Tariffs didn't come out on Liberation Day. They came out on February 4th of last year with fentanyl tariffs on China, Mexico, Canada, around. I think February 4th is the first. I forget the exact timing of those three different things, but. So your, your clock is kind of like maximum of 494. But honestly, you're pushing it close to the edge and you don't want to get past that date. If you get past that date, it's too late to file a protest. And at that point you actually have to file a lawsuit to undo the ipa. Tariffs and lawsuits are very expensive. Protests are pretty cheap. Flexboard and others can just file a protest for you. So that's what we're doing with our customers right now, is now that this is now a thing. They've been overturned, we've been ruled illegal. We're going to, we're going through with all of our customer base and filing protests for all of their IPA entries going back to February 4th of last year. And then we've also created a process on our website@tarriffs flexport.com at the top. You see refund currently says refund calculator because that's what it said as of Friday. Trying to get the team to update it, just refund, you know, claim your refund. But that's what that is. We're bringing people in. First of all, calculating the dollar amount of how is potentially owed, I think likely owed, very high probability. And then getting you enrolled in a program where we'll go file those protests for you. What we don't know yet is, is filing a protest enough? If I file a protest and you acknowledge it as cbp, do you now send me a check or is there some other mechanism? And we won't know that until it gets litigated and they lose, I think. And then, and then customs will provide some clarity for what comes next. But for sure, we know you gotta go get your protests in if you've got any entries and if you're only to take one thing away, if you're a business out there, is follow your protests. And if you, if you want an easy way to do it, call me.
- [13:58]
Ed Elson
It sounds like you both strongly agree that refunds are coming.
- [14:02]
Ryan Peterson
I mean, I was just saying, I
- [14:03]
Peter Harrell
mean, think about it this way. There's nothing magic about tariffs that make them different from any other tax. Right? If President AOC had declared, we're all paying 70% income taxes now, and the court said, no, there's no 70% income tax, of course we'd all Be saying, we get our money back. Right. It just would be obvious to Everybody. And the U.S. government, actually, it processes on the different agency, but on the tax, on the income tax, they do 120 million refunds a year. It's not like the government doesn't do tax refunds. It's not like the tariffs are some magical thing the government can just keep when they're illegal, they're like any other tax. So I do take the point. I very much agree with Ryan. The government can make this hard, Right? They could. They could try to not issue refunds just as companies are filing protests. They could try to require everybody to come in to sue. Like, they could make this administratively hard. But at the end of the day, whether the government goes the easy way or the hard way, the money is going to be ordered to be turned back over.
- [15:08]
Ed Elson
Yes.
- [15:09]
Ryan Peterson
And by the way, the government prepared itself. So Flexport has gotten over $700 million worth of customs refunds for our customers in the last five years. So Peter's point is like a very normal thing. It's very possible. You know, this is a normal thing. You file a protest, you get your money back. The government has been sending those as paper checks from the Treasury Department for the last five years. You get lost in the middle all the freaking time. And they get cashed by scammers. It's a nightmare. Well, about two months ago, maybe, in anticipation of Friday's ruling, they updated their process to say all refunds will now be done electronically through Achievements. And if you want to, it was, like, auspicious. We're all looking at this going, huh? Why are they suddenly getting their house in order and how they're going to process refunds in a more automated fashion.
- [15:51]
Ed Elson
So, which does bring up this question of who's really in charge here. And I think this is why I, at least I'm sure many observers feel a little bit skeptical about the refund idea, because this is really the policy that Trump has hung his hat on. It was all about tariffs. And so the idea that the Supreme Court is going to come in now and say, actually, you don't have the. We're striking it down. We're not going to let it happen. This whole thing that you built your entire administration and campaign on is going to be a failure. It's not going to work. We're going to send all that money that you bragged about for a long time that you were very excited about. We're just going to send that all back. And so I, as an observer, look at that. And I think there is no way that this guy is going to let that happen. I don't know how, but I just get this feeling he's not going to let it happen.
- [16:42]
Ryan Peterson
I think it's a valid point and we should clarify some things here. So the Supreme Court struck down the IPA tariffs, which was one form of tariffs it did not strike down. There's other two forms that he's done are section 301 and section 232. And now the new one, section 122, are other forms, and those have not been challenged. In fact, those have been challenged in the past and held up and so reasonable confidence there. But they're different. AIPA gave this, like sweeping blanket power and he was really stretching, and the Supreme Court ruled he stretched too far. You can't use it the way you used it. But these other ones are more targeted. Section 301, you have to do it on a sector basis, and it requires an investigation by the USTR. And there's 12 of those currently underway investigation. So expect more to come out in that regard. 232 is done on national security grounds, which is 232 is where you get your steel and aluminum tariffs. But also this one has to lose in court, I think. Peter. But they also used it to impose tariffs on furniture. And saying that that's a national security concerned. I see on aluminum you get, you're like, all right, we need to make tanks or something, but furniture, we need our office chairs.
- [17:51]
Peter Harrell
You need desk chairs in the Pentagon. Right? You know,
- [17:56]
Ed Elson
there is another big question here, Peter. I mean, it sounds like the consensus is the refunds will happen based on the iepa. And maybe Trump will just say, okay, you can have that money back, but we're going to figure out more tariffs going forward. But the other big question here, importers, companies, businesses, they're going to get their money back. But there is someone else who paid a lot of the tariffs here, and that is the consumer, on which as much as 60% of these tariff costs were passed on through. The numbers vary, but that is a number that has been cited. Are consumers going to get their money back?
- [18:34]
Peter Harrell
Peter, I hate to say this, but the answer to that is probably not. And here's where you really have to distinguish between the law of the tariffs and the economics of the tariffs.
- [18:45]
Ed Elson
Right?
- [18:46]
Peter Harrell
Under the law of the tariff, the tariff is paid by the importer of record, which might be Home Depot directly, it might be a wholesaler, it might be a small business, but it's the entity that actually imported the good from abroad paying the tariff, and that is who will, under the law, be able to get the tariff back. Whether Trump makes it easy for them or whether they have to sue through the courts for the next one to two years, it'll be the importer record. We get the money back now. Now, in some cases, there might be a contractual arrangement between like a wholesaler and one of its customers where the wholesaler is contractually agreed. If I get my tariff back, I, you know, have to pass on some of that to the, you know, to the retailer. But even if that is the case, you know, when I went to Walmart and bought something that was, you know, 10% more expensive, I have no right to get that money back from, from Walmart. So this is clearly going to be a political issue. I think we're already seeing people in Congress talk about it. I am sympathetic to the kind of moral argument here and to the sort of political issue that is coming down the pipe, but in sort of a legal sense, there's no way for me, having actually paid economic sense, but not in a legal sense, many of these tariffs, to get my share of them back.
- [20:02]
Ryan Peterson
Yeah, and I agree with that. And I would add to what you say by, yeah, consumers are probably getting nothing. Not only they have no legal, they have no leverage. And, and, but whereas the wholesale thing that Peter points out is quite, quite interesting to dig into, which is, I've already talked to a couple, like one importer I talked to yesterday, he's getting it. If all things go well here, he's going to get a $12 million refund and he owns his business. I mean, this guy is off the
- [20:27]
Ed Elson
new vacation homes coming.
- [20:28]
Ryan Peterson
I mean, you know, Right. I told him, I sent him a link to a civilian Blackhawk he could probably buy for, you know, let's buy a helicopter, dude. And no, don't do that. Most lottery winners go bankrupt. Don't be that guy. But he, his concern, which I hadn't really thought about before, he's like, he knows Target and Walmart are going to call him and they're going to, hey, where's my cut, man? You guys, you know, you raised prices on us. So I think that wholesale retailer relationship is going to be fraught and there's going to be some fights there and those guys have leverage. You're like, okay, yeah, don't give us any money then you don't get to sell in Walmart next year. Yeah, so that's interesting. The other really nuance here is it goes to the importer of record, which is, you know, the one that Peter missed on that is actually in the United States, you can have a foreign company as a whole as the importer of record. Yeah, it's true. That's the one that's really going to anger Trump because about what we've seen in our data is not in our data, but in public records that we've analyzed, is that the number of foreign importers of record has been usually about 9% of US trade is done where a foreign company serves as the importer. At least on ocean container trade, which is the easiest place to access public, public records. 9%. That between April of last year and when we ran this analysis, I think it was like in November, it had gone from 9% to 20%.
- [21:46]
Ed Elson
Wow.
- [21:47]
Ryan Peterson
And that's because there's a huge amount of tariff fraud where what was happening is foreign companies would switch and they would import the goods. They would under declare the duties and not pay them properly by just saying, hey, these things are worth a hundred thousand. No, they're not. They're worth 10. And then you just reduce your duty rate by 90%. And first off, those are the guys going to get the checks, not the, you know, it's like Trump's going to be wiring money offshore directly in this thing. It's going to really drive them crazy. And the importer that used to import the goods. So like, let's say I'm a, I'm a brand. I'm buying goods in the US or buying goods from overseas. Traditionally, I was the importer of record in order to avoid duties. This is what was really going rampant. I mean, 11% of all trade flipped to this. They would say, hey, the factory is going to import the goods for me. I'm not involved in the import transaction. I don't worry about that. They pretend like it's not their problem and they don't know anything about what's happening. Well, they're getting no refund at all because the money's just going to their factory. So that's like an interesting nuance here that there was a lot of fraud happening and been watching closely. And I don't feel bad for them at all because they were cheating, so they shouldn't get a refund.
- [22:56]
Ed Elson
Right? Exactly. But it sounds like they probably will. I mean, what we've done here is if we've kind of of deteriorated our relationships with a lot of other nations and made things more expensive for consumers, and now we're going to take the money that was passed on to the consumers, and we're going to send it back to a lot of foreign nations. I mean, to me it's a total disaster. But we could probably go on for hours with this conversation. We should start to wrap it up here. Peter, just before we let you go, any predictions for how this will play out moving forward? Who will be the winners? Who will be the losers? How will it all shake out?
- [23:35]
Peter Harrell
So I actually think the hardest thing for Trump about losing his IPA tariffs is not gonna be the sort of 15% tariff rate on Japan or the 20% tariff rate on Vietnam. I think he's ultimately gonna be able to recreate those tariffs under other authorities. What he's gonna find frustrating is that. But AIPA was really the only law. He could wake up on Tuesday and say, you know what? I want Greenland. And they're gonna be 20% tariffs on Europe on Friday if I don't have Greenland. None of these other laws let him just kind of pull out the tariff sharpie and sign an executive order and impose tariffs. He actually has to do fact finding. As Ryan was saying, you gotta have either the U.S. trade Representative or the Commerce Department do fact findings, spend at least a couple of months to do investigations. You gotta show there's like a trade problem or a national security security problem with the good we're importing or the country we're importing it from. So I think he'll be able to recreate this kind of 10, 15% tariff rate he likes, but he is really going to feel the bite of not being able to just wave his tariff sharpie around and threaten tariffs whenever he's mad at somebody.
- [24:45]
Ed Elson
Ryan, we'll give you the final word predictions on how this will all shake out.
- [24:49]
Ryan Peterson
Well, I thought Peter's earlier point of the trade attorneys are the ones who are really going to benefit here. It's just a lot of complexity. The one good thing about IEPO was it was kind of simple to understand a rate per, you know, you see the rate on the country and now it's these sector based things come with all kinds of nuance that's really hard to unpack. Section 232, steel and aluminum as a really good example, where you have to know the dollar value of the steel and aluminum within the overall value of the product. It's like you have to break that out. And now calculating the duty is much harder. And doing this on the line item level for every product you enter. And you're gonna get more and more complexity because, yeah, it's not just a blanket thing on the country. It's like oh, the sector investigation of this hs, you know this category and often those, those congressional and sorry those commerce department investigations are done like on a blanket basis saying on, on furniture. Well, furniture is not just a thing that has. It's lots of different HS codes and duty rates are dialed down into the HS code, the harmonized schedule code. So you now have to translate executive orders or other forms of regulation into the customs actual day to day life of a customs broker and it becomes quite hard. So you need tools. A final plug. I get, I get to finish tariffs.flexport.com We've built some nice free tools for you to help manage this annoying environment.
- [26:19]
Ed Elson
All right, Ryan Peterson, Peter, Harold, really appreciate your time. We'll have to do this again.
- [26:25]
Peter Harrell
Thanks so much.
- [26:26]
Ryan Peterson
Our pleasure. Have a great day guys.
- [26:30]
Ed Elson
We'll be right back. And for even more markets insights, you can subscribe to my weekly newsletter. Simply put@edwardelson.substack.com.
- [26:46]
Preet Bharara
Support for the show comes from Shopify. Every worthwhile journey starts with a handful of what ifs. But one day you'll be able to look back and realize that all those what ifs were small steps towards turning your dream into a thriving business. Shopify can help you get there. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e commerce in the US from household names to brands. Just getting started. Start off with your own design studio and choose from hundreds of ready to use templates to make a beautiful online store and then turn it into an efficient, well oiled machine. With helpful AI tools, they can help you write product descriptions, page headlines and even enhance your product photography. Connect with customers through an easy to run marketing campaign built through Shopify. And if you just need some advice, they offer award winning 24. 7 customer support. It's time to turn those what ifs into a thriving business with Shopify today. Sign up for your $1 per month trial today at shopify.com profmarkets go to shopify.com profmarkets that's shopify.com profmarkets. Support for the show comes from vcx, the public ticker for private tech. For generations, American companies have moved the world forward through their ingenuity and determination. And for generations, everyday Americans could be part of that journey through perhaps the greatest innovation of all, the US Stock market. It didn't matter whether you were a factory worker in Detroit or a farmer in Omaha. Anyone could own a piece of the great American companies. But now that's changed. Today, our most innovative companies are staying private rather than going public. The result is that everyday Americans are excluded from investing and getting left further behind, while a select few reap all the benefits. Until now. Introducing vcx, a public ticker for private tech, VCX by Fundrise gives everyone the opportunity to invest in the next generation of innovation, including the companies leading the AI revolution, space exploration, defense tech and more. Visit getvcx.com for more info. That's getvcx.com carefully consider the investment material before investing, including objectives, discharges and expenses. This and other information can be found in the Fund's prospectus@getvcx.com this is a paid sponsorship.
- [28:58]
Peter Harrell
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Ed Elson
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Peter Harrell
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- [29:30]
Ed Elson
We're back with Profg Markets. So after all that, the tariffs have been called off, I can't say we didn't expect this. In fact, in our June 2 episode, we explained why this would happen. Here's what we said. The law literally says, you know, this is only legal if it is in response to, quote, an unusual and extraordinary threat to America. I mean, Trump said the threat was the trade deficit. A trade deficit is completely normal. That's not a threat. And indeed, that is what the court ruled. As we've discussed before, this all goes back to who has the power to do what. And when it comes to issues of taxes, or as James Madison called it, the pockets of the people, that power lies with Congress, not the president. And tariffs are essentially a tax. So tariffs are now illegal. The obvious question is now what? Will the tariffs just disappear? Will there be tariff refunds? What will happen to all of these trade deals? Or as we prefer to call them, concepts of plans of trade deals? These are the trillion dollar questions on which thousands of businesses and workers depend. And the answer is a pretty unsatisfying one. And that is, we don't really know. We don't really know what will happen to those trade deals. We don't really know what will happen to the refunds, and we don't really know what will happen to the tariffs themselves. Most things are up in the air, which is probably why the markets are reacting. The way they are, and that is they're reacting very ambivalently. Now, we can make some educated guesses based on what we do know. And I think the first thing that you should count on at this point is that the tariffs are still on. Trump immediately responded with those 10% tariffs and then 15% tariffs, which are legal under that U.S. trade act of 1974. The only caveat is they only lost 150 days, at which point they must be approved by Congress. So what we can expect is that the tariffs will remain on the table. Trump and his legal team will be fighting tooth and nail then to figure out how to get them extended in some way, either through Congress or through some other trade law. So my expectation, and I think it's Peter and Ryan's expectation, too, that tariffs will remain in one form or another for the foreseeable future. Now, what does this mean for our deals with other nations? Well, as you know, I don't think we ever even reached a deal with any other nations. My definition of a deal is a written contract signed and ratified into law. We didn't really get any of that. All we got was spoken frameworks that were really heavy on the PR and really light on the details. So in that sense, I'm not sure much has changed here. We still have no deals, we still have no certainty. And yes, we have still degraded our relationship with most of our allies around the world. That all remains the same. The biggest question is the tariff refund. Because if those $175 billion in tariff revenues were illegal, which they are, then businesses are now entitled to those refunds. Now, I'm not sure how it will work. As Justice Kavanaugh wrote, the refund process is likely to be, quote, a mess. But here's what I can tell you. If those refunds do happen, then the people who actually paid them, that is the American consumer, they will not get their money back. As we've discussed before, it was Americans that paid the cost of tariffs through higher prices. And according to the Yale Budget Lab, of the costs, as much as 63% was passed on to consumers, which is why your grocery bill exploded last year. But unlike importers that have direct receipts of their tariff payments, you, on the other hand, don't. Which means even though you paid the cost of tariffs, you will not be getting a refund. And so what this really boils down to is, once again a direct wealth transfer from regular Americans to large corporations. Trump has, once again, I'm sorry to say it screwed over the consumer and we can hash out the finer details as much as we like. But big picture, that is what happened here. As I've said before, Trump's tariffs will go down as America's Brexit minimal upside, maximal downside, and an economic outcome that made regular Americans, for the most part, poorer. That will be the legacy of tariffs. And we are now watching that legacy unfold right before our very eyes. That's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. Thank you for listening to Profgy Markets from Profg Media. If you like liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.
- [34:40]
Preet Bharara
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