Chapter 1: Why were Trump's tariffs deemed illegal by the Supreme Court?
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Okay, Cara...
How do you feel? You saw? Yes, I saw the news and I never thought this day would come. Honestly, it's like, was the Supreme Court ever going to rule on it? Like, you know, were we going to be in this kind of like purgatory forever?
But it has come. So I'm so happy. This is Cara Dyer. She is a small business owner in the U.S. And the big news is... The U.S. Supreme Court has said that President Trump's giant sweeping tariffs that he imposed early last year are illegal.
Dunzo.
This is huge news. We are talking about his tariffs on products from all over the world, almost every single country, a different percentage tariff on each of them.
And those percentages, they've gone up and down and up and down for more than a year. But from early on, there were lawsuits against President Trump. States and companies and individuals saying that these tariffs, they are not legal. And now a lot of businesses and people like Cara, they're thinking maybe they could get some of the money they spent on those tariffs back.
OK, wait. So so what do you do now? Well, I've kept meticulous records and I will be asking for. Yeah, yeah, I did. Just every little fee and tariff. Yes, yes, absolutely. Absolutely. So like, OK, now they've ruled that it's illegal. Now we need to take some action and get those refunds back into the hands of businesses.
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Chapter 2: What implications does the ruling have for businesses and consumers?
It stands for the International Emergency Economic Powers Act. And back when we first talked to her, here's what Kathleen told us.
We trade lawyers don't think of IEPA as a trade law. This is not something that I teach in my trade class. It's there. But it's not on the short list for how we think about imposition of tariffs in the U.S. economy.
And today, the Supreme Court told us what they think about AIPA and how Trump has been using it.
Actually, the justices had a lot of thoughts about AIPA. There are multiple opinions. The whole thing is 170 pages.
We knew it was going to be long, but 170 pages really is something.
Yeah, so this decision, it kind of landed on your desk with a thump.
It's a real thumb. I was going to show you I had printed it, but I printed it double-sided and two pages per sheet just to save the paper. Kathleen says the takeaway from all those 170 pages really boils down to just a few key parts where the court is trying to just interpret the literal words of the law.
Yeah, you see, in AIPA, it doesn't literally say the president can impose tariffs. It says something much more vague. It says the president may, quote, regulate, dot, dot, dot, importation, like the importation of goods.
It was simply a question of, does the statute, AIPA, allow the president to impose a tariff on the basis of those words? Today we got the answer. The chief justice says, those words cannot bear such weight. Those words cannot bear such weight. That's the key phrase.
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Chapter 3: Are there any refund options available for those who paid tariffs?
And as you can imagine, we are not the only ones bombarding Maureen with questions on this day.
I feel like the snakes just keep popping out of the peanut brittle can that is my inbox today.
And what are the questions that people are asking you?
Well, OK, what happens next? Can I get a refund? When can I get a refund? How do I get a refund?
Vereen says if you were to vastly oversimplify this very complicated world of customs law, there are basically, let's say, three ways that companies could, in theory, get refunds on the tariffs they paid. So option number one, turns out customs actually already has a process to get refunds on your tariffs. Because, you know, the U.S. has had lots of tariffs over the years.
And there have always been people who have maybe over-calculated how much they owe in tariffs. So companies can go to customs and say...
Hi, excuse me.
Can I get a refund on my tariffs? I kind of overpaid.
Thanks.
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Chapter 4: What steps should businesses take to pursue tariff refunds?
So no one could know if the Supreme Court would decide whether they were legal or illegal. So it was this annoying uncertainty for companies. Right. Maybe, maybe they would get refunds in the future. Yeah, but companies don't want maybe money in the future, right? They want for sure money today. So they wanted to get rid of this annoying, complicated risk, even if it cost them a little.
And whenever anyone anywhere in the world utters those words.
Certainly it's a call to action for us.
Us, Wall Street and hedge funds. This is Wes Harrell. He's the head of a trading group at Seaport Global. He's a broker. And he says this new baby market was born around November. Suddenly Wes and his colleagues start getting calls.
We start to get phone calls from importers and we're also making outgoings to importers and basically anyone that we believe has paid a tariff since Liberation Day.
These importers, these companies are like, OK, we have these potential tariff refund claims. Does anyone want to basically buy this potential refund or part of it? Meaning like give me the company a fraction of the refund that I might get and then you, the buyer, can get the full refund if it ever comes.
And do you know who has cash and who might want to buy this kind of stuff? Hedge funds. There are hedge funds, Wes's clients, that focus on bankrupt companies or near-bankrupt companies who are looking for ways to make bets on litigation or anything weird or risky in an odd way or overly complicated things that might make money.
And Wes's job is to call those people up and say, hey, I have this weird, risky in an odd way, overly complicated thing that might make money. At what price would you be interested in buying it?
So here's how it has been working before this Supreme Court decision. Let's say I'm a dress company and that I have paid $20,000 in tariffs from importing dresses. That is potentially $20,000 that I might get refunded. I would go to Wes and say, I don't want to deal with this uncertainty, with this risk. Can you sell it? I don't need to get the full $20,000 back.
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Chapter 5: How is the new 10% tariff different from previous tariffs?
And I just don't see the administration turning around in short order and immediately issuing refunds.
Brett Kavanaugh summed it up as mess.
Yes, exactly. That's a great quote from today.
After the break today, President Trump added new tariffs and we'll tell you how.
So this big Supreme Court decision, it didn't get rid of all of Trump's tariffs, just the big sweeping ones he tried to create using IEPA.
But there are other laws that give the president the power to create tariffs. Kathleen Clausen, our trade law professor, ran through a whole list of them with us last time she was on the show.
Most of these statutes go by their three digits. So if you want to sound cool in trade world, you have to start talking in three digits, right? Section 301, Section 232, Section 201. The list goes on.
So these laws, they were mostly created during the Cold War to give the president economic powers to, you know, deal with all that Cold War stuff. But for decades, through the 90s and 2000s, they weren't really used that much.
Because we had become a member of the World Trade Organization, we were committed to lowering tariffs. We were not interested in raising tariffs. And so it's only since Trump won that they experienced this renaissance.
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Chapter 6: What is Section 122 and how could it affect future tariffs?
No.
Yeah. Not at all. Not at all. They were willing to do things that were like probably not legal, like, you know, put us in a big container with lots of other things. items and not reported or say that our inventory wasn't worth as much as it was. Those were the kinds of things that were sort of offered to us. And we didn't really take them up on that. Tempting though, right?
Yeah, tempting, but super risky, right?
It was like the factories in China that would say like, we'll just say that there's only $200 in that container, not $500.
Yes. Yeah, but I didn't feel comfortable with it. So we never did anything like that. Wow.
Kara ended up switching suppliers. But beyond that, Kara changed up her whole business, actually. She didn't order any large shipments because tariffs were so high and unpredictable that she thought they'd put her out of business.
We did pull back. We didn't place any other large orders this past year. And instead, we focused on developing new products and testing them out.
Kara instead decided to have like a testing year to just develop new products and not necessarily import them. So she designed this Little Red Riding Hood storybook, she calls them. Her company is called Storytime Toys. Kids can read a fairy tale and then play in that fairytale world that they build. They're like these little sets.
Red Riding Hood can go through the woods and get to her grandmother's house and the wolf can put the grandmother inside a little, you know, a little armoire to hide her. And so there's lots of fun things about that set.
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Chapter 7: What challenges do businesses face in navigating tariff refunds?
But I mean, if they're illegal tariffs, we need that money back so that we can invest it in growing our business and operating our business.
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This episode was produced by Sam, Yellow Horse Kessler, and Willa Rubin. It was edited by Marian McKeown. It was fact-checked by Sierra Juarez. Alex Goldmark is our executive producer. Thank you to Eliza Ronald-Tannen for some great reporting at Bloomberg on the tariff rebate trading. And to Martha Gimbel at the Yale Budget Lab. I'm Mary Childs. I'm Sarah Gonzalez.
And I'm Jeff Guo. This is NPR. Thanks for listening.