What the actual tariff?

Summary

Unhedged Podcast Summary

Episode: What the actual tariff?
Date: February 26, 2026
Host(s): Katie Martin (A), Robert Armstrong (B)
Guest: Alan Beattie (C), FT trade expert

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Episode Overview

This episode delves into the chaos following the US Supreme Court's recent decision blocking former President Donald Trump’s attempt to impose sweeping "emergency" trade tariffs. Katie Martin, Robert Armstrong, and FT trade specialist Alan Beattie unpack the legal, economic, and practical ramifications of the ruling, explore Trump’s alternative tariff strategies, and weigh the impacts on markets, the public, and global trade. The tone is sharp, witty, and irreverent, balancing technical insight with humor.

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Key Discussion Points & Insights

1. Background: Supreme Court Blocks Trump's Tariffs

• Recap: Trump tried to use the International Emergency Economic Powers Act (IEEPA) to impose tariffs, but the Supreme Court ruled this was an abuse of emergency powers ([00:09]–[02:55]).
  • “You can't always get what you want,” quips Robert (B) ([00:09]).
  • The ruling affirmed that the IEEPA can't be used for tariffs, especially outside true emergencies ([01:55]).
• Constitutional Principle:
  • Discussion on whether the President has the unilateral right to impose what amount to taxes, or whether that power sits with Congress ([02:55]–[03:25]).
  • “Has he taken the powers of Congress from Congress? ... The majority said, yes, he has, and it's not allowed.” — Katie (A) ([02:55])
• Alternative Legal “Tools”:
  • Trump's pivot: attempts to use "Section 122" (balance of payments tool), a rarely-used legal provision from a bygone era ([04:05]–[05:29]).
  • “It’s like a workshop and there’s a whole bunch of tools lying around ... Supreme Court said, put that down right now.” — Alan (C) ([04:05])

2. Legal and Practical Loopholes

• Section 122:
  • Allows for up to 150 days of global tariffs in cases of “balance of payments crises.” US doesn’t actually have such a crisis; the tool is anachronistic ([05:03]–[05:29]).
  • “We’re going back into the olden days ... By any sensible measure, the US does not have a balance of payments crisis at the moment.” — Robert (B) ([04:50])
  • The approach: Use Section 122 as a temporary shield, then scramble to construct lasting tariff policies while legal battles play out ([05:29]–[06:26]).

3. Economic and Market Impact

• Stock Market Reaction:
  • Markets already priced in the Supreme Court decision, and also expect more tariff “musical chairs” ([07:46]).
  • “I think it was a deep consensus view that this Supreme Court ruling would go against the president...had already priced in.” — Katie (A) ([07:46])
• Tariff Revenue & US Debt:
  • Tariff revenue is not a huge piece of federal finances; the ongoing deficit dwarfs any loss ([08:25]).
  • “It’s about 2%...of the federal debt. Right, right. Not huge.” — Alan (C) ([08:25])
• Reimbursement Chaos ([09:47]):
  • Around 1,800 companies are suing for refunds.
  • “We're talking asbestos levels of lawsuits,” quoting a Wall Street Journal-sourced litigator ([10:03]).
  • Potentially, refunds will also go to Chinese companies that acted as US importers of record ([14:45]).
  • “Trump has put in a tax on American consumers in order to subsidize Chinese.” — Alan (C) ([15:35])

4. Refunds, Lawsuits, and Administrative Mayhem

• Complexity and Uncertainty:
  • No one—government, courts, or companies—knows how quickly refunds will be processed. Estimates range from a few weeks to years ([11:04]).
  • "This is gigantically, massively complicated...Who paid when? How big are you? No one wants responsibility” — Alan (C) ([11:04])
  • Concerns about the impact on US deficit and treasury revenues if large refunds are paid out ([11:49]).
• Consumer Impact:
  • Most refunds will not reach ordinary consumers. The system repays only the "importer of record" ([16:00]).
  • “There's no way of actually compensating consumers because once [tariffs are] in the economy, that's it.” — Alan (C) ([16:40])
  • Some companies use refunds as clever marketing (e.g., Cards Against Humanity) ([16:39]).

5. Wider Economic & Political Takeaways

• Who Was Hurt?:
  • The US itself, primarily importers and consumers, not foreign exporters ([13:37]).
  • “...if you put tariffs on, it mainly hurts you...The US is actually quite a closed economy anyway.” — Alan (C) ([13:37])
• Tariffs' Political Unpopularity:
  • Tariffs are unpopular with voters, and Trump may be exposing himself politically ([17:31]).
  • Democrats are increasingly seizing the opportunity to attack on the issue ([17:31]).
  • “Tariffs are not popular. And Trump doesn’t seem to understand this.” — Alan (C) ([17:31])
• Inevitability of Chaos:
  • Ongoing legal and political battles expected, with months of uncertainty ahead.

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Notable Quotes & Memorable Moments

• On Trump's approach to tariffs:

  • “You can’t spell tariffs without ffs.” — Katie (A) ([00:09])
  • “He also slapped on some other tariffs. It's all a mess.” — Katie (A) ([00:09])

• On legal patchwork:

  • “I think of you more like a crow rather than a vulture.” — Katie (A) ([01:31])

• On legal opinions:

  • “Hard to un-murder someone.” — Katie (A) ([09:38])

• On the absurdity of refunds potentially going to China:

  • “Trump has put in a tax on American consumers in order to subsidize Chinese.” — Alan (C) ([15:35])

• On political chaos:

  • “I'm kind of for it. I live for the chaos.” — Robert (B) ([18:23])

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Timestamps for Important Segments

• [00:09] - Opening, summary of Supreme Court ruling, Trump's reaction
• [01:55] - Alan Beattie explains the legal reasoning behind the Supreme Court decision
• [04:05] - Section 122, the new legal tool for tariffs
• [07:46] - US stock market response to tariff policy chaos
• [10:03] - Lawsuits by companies seeking tariff refunds, “asbestos levels” of litigation
• [13:37] - Economic damage shakedown: who was actually hurt?
• [14:45] - Refunds to Chinese companies and how importers of record work
• [16:00] - Discussion about why consumers won’t get their money back
• [17:31] - Tariffs are politically unpopular—potential implications for Trump

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Tone & Style

Anchored in the FT’s trademark dry wit, the hosts and guest balance detailed economic insight with lively, sardonic banter ("crow vs. vulture," "asbestos levels of lawsuits," "can't un-murder someone"). The episode makes complex legal and economic issues accessible through analogies ("workshop of tools"), humor, and realpolitik analysis.

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Conclusion

The Supreme Court has quashed Trump’s emergency tariff play, but the trade drama is far from over. New legal tactics, administrative confusion, and political ramifications ensure that uncertainty will persist in trade policy—and, for now, markets, companies, and consumers are all left navigating the fallout.

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Best for listeners who want:

• An inside look at how US trade policy is improvised and legally contested
• An understanding of the intersection between finance, law, and politics
• Amusing yet accurate economic commentary with actionable insights

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(Summarized by Unhedged Podcast Summarizer)

Transcript

[A]

Foreign.

[B]

Donald Trump is learning the hard way that you can't always get what you want. Last week the Supreme Court said that actually, Mr. President, no, you cannot have your beloved emergency trade tariffs that you announced last April because you're not using them for an emergency. And anyway, you can't just do that because you feel like it. I'm paraphrasing the legal wording here, but the point is no tariffs. Tariffs. Trump reacted in his usual even handed, thoughtful manner by saying the judges who voted against him should be absolutely ashamed. He also slapped on some other tariffs. It's all a mess. That goes to show you can't spell tariffs without ffs. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at FT Towers in London, the greatest city on earth. Joining me, I have, as usual, my co pilot, Captain Robert Armstrong, off of the Unhedged newsletter in New York City. But also I have someone who actually understands all this stuff and writes about it for the ft. Alan Beattie in the house. Alan, thanks for coming back. Clearly we failed to put you off last time.

[C]

Yeah, well, I very much appreciate that. I get invited onto Unhedge, basically where there's some massive carnage in the global trading system and I sort of like get the vulture in who won't come and pick the carcass clean of, of any scraps of meaning.

[A]

I think of you more like a crow rather than a vulture.

[C]

I'm actually gonna take some time to think about that and possibly the next time invited on, I'll have an answer for you, but not quite yet.

[B]

So, Alan, look, normal people have better things to do with their time than track Supreme Court rulings on trade tariffs. So please, for those of us at the back of the class, get us up to speed what happened last Friday.

[C]

What happened was the Supreme Court basically backed rulings last spring and summer from something called the Court of International Trade and then a federal appeals court that said you're trying to use a particular piece of legislation, the International Emergency Economic Powers act, which is supposed to be, as its name suggests, for use in emergency, and it allows you to regulate or prohibit, quote, unquote, imports. It has never been, it's been around for 50 years. It has never been used for tariffs. He's clearly not using it in an emergency. He's clearly just using it for tariffs for that reason. This particular bit of legislation you cannot use for this.

[B]

So is it that it's not an emergency or that you can't Declare it to be an emergency, or is it like a combination of all these things?

[C]

I mean, he did declare an emergency. Congress subsequently voted against one particular bit of it and said it isn't. But what a lot of the argument focused on was that this particular thing doesn't let you use tariffs.

[B]

Right, right.

[C]

That's it. It's, you know, other things that you use tariffs, try and go and use other things, which we'll talk about. But this particular thing, this is not what it's for, and that's what. And you can't do it.

[A]

I don't mean to argue about scripture with a nun here, Alan, but reading through the decision from the Supreme Court, a lot of it was about constitutional principle. Does the President have the unilateral right to impose taxes, and is this him doing that? In other words, has he taken the powers of Congress from Congress? And the majority said, yes, he has, and it's not allowed. So it wasn't all particular. Some of it was broad and sweeping.

[C]

That is true. But there are various bits of legislation where the President can impose tariffs without necessarily having to be voted on by Congress. It's just the issue that this is not one of them. And by using this one, he's doing exactly what you just said, which is expanding the powers of the executive beyond what the Constitution said that he actually has.

[B]

So it's basically just no, just knock it off now. But it's not just no, is it? Because quick as a flash, Trump says, well, I'm going to declare a 10% global tariff. Actually, no, call it 15%. Make this make sense to me, Alan, how come he can still do this or can he still do it?

[C]

So if you think of it as being like a workshop and there's a whole bunch of tools lying around. So to begin with, he picked up the ipa, that's the International Emergency Economic Powers act, and started using that. And Supreme Court said, put that down right now. So the next one he's picked up is called section 122, and it's a particular tariff authority which is supposed to be used when there's a balance of payment crisis, when the US Just can't cover its debts. No money is coming in now. You know, not many countries, certainly not the US have major balance of payments crises under floating exchange rates. This is really a concept that goes right back to the Bretton woods fixed exchange rate system. So he's picked up a tool.

[B]

The whole financial system was like, based on the price of gold, right? It's like, yes. So we're going back into the olden days. The point where this was really relevant. And like, by any sensible measure, the US does not have a balance of payments crisis at the moment.

[A]

Right.

[C]

However, what's interactive from his point of view is the court. This can be challenged, but the courts are likely to give a bit more deference to him saying there's a balance of payments crisis because it's hard to define than using the Emergency Powers Act. In any case, he can bring this in very quickly for 150 days.

[A]

Yeah, that's the number that interests me. Like, this is just a band aid. It lasts five months. Right.

[C]

So this is a shield. I mean, there's some theory about he could go to 150 days and then start an entirely different section 122. But their strategy, which I think has been made fairly clear. They've made fairly clear, is you put section 122 up there for 150 days. While it's there protecting you build another wall behind it which is built of different tools which you've just picked up from the workshop, which take a bit longer to use. All of these things are challengeable in theory, but you can stall it for so long. And I kind of find it quite hard to imagine the Supreme Court getting to the point of saying, right, we are going to take all your tariff power away and say it has to be held by Congress. The thing that will really stop him, I think, is actually not the judiciary. It is if the Democrats gain control and they can assert, which is, after all, what is supposed to happen is right there literally in Article 1 of the Constitution is the Congress has the power to regulate foreign trade.

[B]

Yeah, yeah.

[A]

Can I ask again? The thick kid in the back is sticking his hand up here from the kind of patched together tariffs we might get if the Democrats don't retake control. And Trump goes through all the picking up the dusty tools from the back of the workshop. How different are the new tariffs from the old tariffs? There'll be tariffs. I agree with you on that point. But will they be universal? Will they be partial? More on China, less on Europe?

[C]

I mean, if you use them flexibly, you can, you can do a fairly good job of approximating. We're already seeing some sort of little anomalies like gems and so on, which are, which are not covered. But by and large, if you think the US wants, you know, broad protection of its manufacturing and particular protection on certain things like steel, that will still be there.

[B]

A couple of things. So first of all, when the Tariffs were all announced in April, like the famous like Rose Garden board with all the tariffs on it, tariffing the penguins, yada yada. We're all quite familiar with what happened last April on liberation day. The U. S Stock market got fried. Right. It dumped about 20% in a few days. So like Rob, why is the U. S. Stock market not adding 10 to 15% now that those tariffs have been taken away?

[A]

Because it did it already. In other words, I think it was a deep consensus view that this Supreme Court ruling would go against the president. I think he might be the only person in the world who was surprised by it, that had already priced in. But I think the other answer is what Alan just described. The kind of musical chairs of trade regulation is also a consensus expectation. So it's going to be messy at least for another year or two, right?

[B]

Yeah.

[A]

And that's what the market is responding to.

[C]

I think I was thinking about this and you think maybe I've got these numbers wrong. But if you think of this hit, which is about 750 billion, something like that, that as being a one off hit because he's going to get the, you know, the tariff revenue once he's got the new tariffs, you think of that as being a one off hit. It's not an ongoing cost, it's a one off hit that's like 2% or something of the federal debt. Right, right. It's not huge. You think of it as a one off increment. It's not that big. If it's a serious hole in his ability to tax going forward, I suspect there will be more concern.

[B]

So there are nine justices on the Supreme Court, three of them said it's fine Mr. President, you can have what you want. Six of them said, no you can't. Of the three that said it's fine, you can do this. One of them, I can't remember which one. And Rob, I'm sure either of you will be able to remind me, said, well you kind of can't really undo this because it would be a real like pain in the ass to figure out how to reimburse people for all the tariffs they've already paid. Which is like, it's a view.

[C]

I think that was justice Kavanagh. I think there was Brett Kavanaugh, who I could only imagine metaphorically, if not literally, was just reading talking points the White House had given him under the table.

[B]

Ye, it's like, well I've shot him dead and I can't make him alive again. So like, I mean, let's all just

[A]

move on, shall we? I mean, the body, it's a body. But, you know, very hard. You know, it's so hard to un. Murder someone.

[B]

So really difficult. But that does raise the really interesting question of how to reimburse people who. So you've paid. You're a company. You've paid these tariffs. Now it turns out those tariffs were illegal, so you're due to be reimbursed. Fun times.

[A]

So something like 1800 companies are suing to get back the money they paid under the tariffs. And it's big companies like Costco and little companies and everybody in between. And there was the following delicious quote in our competitor, the Wall Street Journal yesterday. We're talking asbestos levels of lawsuits, said Matthew Sigelman, a federal litigator who's filing lawsuits for importers. All happening at the same time.

[B]

Beautiful scenes. Now, this whole thing is just fascinating, right? Because, you know, it turns out that the sons of Howard Lutnick, the Commerce Secretary, have been running an operation at Canter Fitzgerald, the brokerage that Lutnick was CEO of, to help companies to get this. These reimbursements, right? There's a whole, like, cottage industry and how to get companies this money back. Like, Alan, this looks to me like just an insufferable nightmare from start to finish. How is this going to work?

[C]

This is gigantically, massively complicated, to the point where if you talk to a different bunch of people who really all ought to know what they're talking about, they tell you totally different things. I hear things from, oh, yes, this will be a few weeks. It will be administrative to. This will be two to five years. I think it will actually depend quite a lot on when you pay the tariffs, how big a company you are, that sort of thing. But there is a huge amount of uncertainty around it at the moment.

[A]

There are.

[C]

And people do not want to take responsibility. So the White House said, not our problem. Go and ask the Supreme Court. The Supreme Court was silent on the matter. That bounces it back down to the first federal court, the Court of International Trade, who I have a gigantic amount of respect for because, you know, they're proper good nerds. They have to come up with a way of adjudicating people's claims and then giving the money back.

[B]

So, Rob, how this is an issue, right? Because one of the things that's been helping the US Deficit, right, it spends more money than it has. One of the ways it's been helping to plug that gap is the revenue that's been coming into treasury coffers from tariffs. So first of all, it looks like that money that's coming in is at least going to slow quite dramatically. Some of it might need to come out again. Again, it's a mild surprise to me that that's not slightly bugging the bond market because this has been touted as one of the reasons why the US Government bond market has been quite well behaved.

[A]

It's true and it is. There is a revenue issue here given that taxes were cut and part of the way to fill the hole in the bucket was tariffs. But you have to keep the scale in mind. Alan will know better. We're talking about two to $300 billion a year of tariff revenue that all this stuff generated. And total tax revenue in the United States is in the trillions, not the heads of billions. So it's a problem on the margin, but we have so many deficit problems on the margin that it's just one of many.

[B]

Yeah, yeah.

[A]

I have a question which is now, you know, this is a kind of natural point for us to pause at this moment in history and look back at this whole sorry episode that started coming up on a year ago now and ask how much economic damage was done. Is it too general to say? In effect, what happened is Trump put a smallish tax on U.S. importers and consumers and it was a little sand in the gears, but enough for the system to absorb functionally. Is that what happened?

[C]

Yeah, that is actually what happened. And the main cost of this is the US not anywhere else. And I know we're all used to, and I'm as bad as anyone, we're all used to thinking in sort of export oriented, mechanical mentalist terms and saying this is terrible for the countries exporting to the US and so forth. But you know, it's much more terrible for the US because if you put tariffs on it mainly hurts you and no one else has done it. The US is, is actually quite a closed economy anyway, by which I mean self sufficient. Right. And so it's not that big in the, in the global economy or global trading system as you would think.

[B]

Sometimes it's about the friends you lose along the way. Right.

[C]

But you know, in a sense it's just, it's just, it's just slightly detaching itself. And I mean this is happening across a bunch of different sectors as well. Like you know, in green tech, for example. The US is not stopping what's happening globally. It's just, it's just not playing, it's just absenting itself.

[B]

Yeah.

[C]

So that's what's doing here.

[B]

Just to go back really quickly to the whole refunds thing. You were writing in your newsletter today, Alan, that actually a lot of these repayments are potentially going to go to shuffles, paper, checks, notes, Chinese companies. Yeah. So what are you talking about, Alan?

[C]

So this is, this is genuinely comic, but the way tariffs work is they are paid by importers, everyone knows that. And it's paid by someone called the importer of record. Unusually, it's quite easy for foreign companies to be importers of record as well. So you can have a Chinese exporter which exports into the US also pays the money over to Customs Border Protection, despite not actually being a company in the us and then sells it on. Now, what this means, because all the refunds go to the people who paid it, right? Who actually handed the cash over. It doesn't matter whether they hand it over. They, they pass those costs on to other companies, to consumers, whatever. They just pay it back to the people who paid it. The impact is that when some of this money goes back, it goes back to Chinese companies. Now, when you think Trump's going to

[A]

love that, he's going to love it.

[C]

So when you think, when you think that they basically have passed this on to American companies and consumers, Trump has put in a tax on American consumers in order to subsidize Chinese.

[B]

That leads me neatly to my next question. When does Robert Armstrong receive compensation for the additional price of the martinis he's been drinking in New York?

[A]

It's true.

[C]

It's only as true.

[B]

When do consumers get the checks?

[C]

Consumers will have to go and try and badger the shops that sold them stuff. Now this is going to be quite an interesting thing. I talked to some people this week from something called the Main street alliance who represent a lot of small businesses and their small businesses were saying, we're getting customers saying, hold on, can we have this money, please? And in some cases those businesses are like, we haven't raised our prices. We didn't think we could. We've taken hits on margins, we've let people go all this sort of stuff and you know, but it's going to become a marketing tool. For example, if, you know, the company cards against Humanity, who do this sort of party game things, they've actually set up a website saying, if you bought our cards not direct from us because we didn't put up prices, but via one of the big retailers who they say did put up prices or we will give you money back.

[B]

Oh, cute, right?

[C]

Nice. It's just a Marketing thing. It's not legal, but, you know, there's no way of actually doing it. There's no way of actually compensating consumers because once they're in the economy, you know, that's it. They're in a free market economy. You can sell them to ever whatever price.

[B]

Rob, if I was you, I would be mad as hell. Are people mad as hell about this?

[A]

No, I think people are in your so much. I'm mad as hell about it, but I'm not a very good test case. I think it's, in a way, it's kind of like Doge. You remember Doge, that was gonna cut the government in size by a third or whatever. I mean, that didn't work at all. Everything went the other direction and people have just forgotten about it. Right. It's like there was this big tariff noise. There was a lot of singing and dancing. Nothing happened. Shrug your shoulders, move on.

[C]

But I would say if you just look at the polls, tariffs are not popular. They're really not popular. And Trump doesn't seem to understand this. His administration does, because they keep sort of opportunistically cutting tariffs when they can. The Democrats have finally woken up and realized this is actually a thing they can get behind. And one really amazing thing I think Trump is doing now is he's going to reconstruct these tariff walls using the authorities I was talking about before, the two 3:2s and the 300:1s. That's going to take a bit of time because you have to go through this sort of investigation procedures and so forth. At the same time, I think there's just going to be ongoing rows about people not getting their tariffs back, and Trump is not going to be very helpful about tariffs back. So you're now going to have a period of months when Trump has basically put himself out there, exposing his flanks on a policy which is not popular, letting the Democrats hit at him. Consumers, consumers hit at him. Companies and everything hit at him.

[B]

You know, I'm kind of for it. I live for the chaos. We are going to be back in just one second, listeners with long short. Okey doke, listeners, it's time for Long Short. That part of the show where we go long a thing we love or short a thing we hate. Alan, since you've been generous enough to join us, you can go first.

[C]

So I. I'm not sure I'm allowed this, but it's a very metaphysical one. I'm going long. Irony.

[B]

Okay?

[C]

Because first of all, you have Trump taxing consumers to Pay Chinese companies. Then this week, the British Trade Minister, Peter Kyle went over to Brussels, Remembering this is 10 years after Brexit, and lectured them for raising trade barriers.

[B]

Beautiful. I love that. For him, I am long acronyms. Market nerds love an acronym. Yes, the Taco trade. T A C O Trump always chickens out. Invented by some guy called Rob Armstrong. I'm making the case for Wacko Wash. Always chickens out because I don't think he's going to upset the markets in the way that he could do, I reckon, chicken out loud.

[A]

I like that trade.

[B]

Yes.

[A]

So on the wacko trade, we are long treasuries. Is that.

[C]

Would that be right?

[B]

I guess. I guess Wacko is long. Is long Treasuries. But this week, yes, customers, we have a new one, the Halo trademark. Investors are looking for heavy asset, low obsolescence companies. It doesn't trip off the tongue, I'll be honest. Obsolescence, I don't know. It's a bit of a long word, but I kind of like the idea. People want boring, safe companies. So Halo Trader is. So I'm long acronyms.

[A]

I wrote about Halo in my newsletter yesterday. Halo is the product of a guy called Josh Brown and I just wanted to call out Downtown Josh Brown.

[B]

Oh, is it him?

[A]

Yeah, it's him. I think he came up with Halo because, you know, for reasons you'll understand, I'm very sensitive to acronyms being misattributed. So I'll take. I'll take short on the Halo trade. It's a good acronym, but if you think I'm paying 25 times earnings for like, some trucking company, you're crazy.

[B]

Well, it's. It's an acronym inventor smackdown right here on the show. Rob Armstrong versus Downtown Josh Brown. I'm here for it. Listeners, if this is the sort of content that pleases your ears, then you'll be delighted to know that we'll be back in your stream on Tuesday. So listen up then, and in the meantime, thank you for your attention to this matter. Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Foreheads. Cheryl Brumley is the FT's global head of audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free and a 30 day free trial is available to everyone else. Just go to ft.com unhedgedoffer I'm Katie Martin. Thanks for listening,

[A]

Sam.