The Scramble Is On for Businesses to Get Their Tariff Refund Checks

about to start consensual telephone call with Dr. Diwasang.

“China's Ministry of State Security is one of the most mysterious and powerful”

spy agencies in the world. But in 2017, the FBI got inside. Wait. That's a notion, you know. Hey, you got people on your whole body, is it?

I've never seen that much evidence in my entire career.

And I don't think we'll ever see that much evidence again. I now have several terabytes of an MSS officer, no doubt, no question of his life. And that's the Unicorn. This is a story of the inner workings of the MSS,

and how one man's ambition and mistakes open its vault of secrets. Listen to the sixth bureau from Bloomberg Podcasts, starting on February 13th on the I-Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Bloomberg audio studios.

Podcasts, radio, news. Hello and welcome to another episode of The Odd Lodge podcast. I'm Jill Wiesenthal. And I'm Tracy Allaway.

“Do you think you and I are going to start getting checks”

because they struck down the tariffs, right?

And according to economists, consumers pay the tariff. So consumers pay the tariff, so they strike down the refund. Shouldn't we get the money? I have often said Joe. I buy a lot of stuff.

Yeah. Especially from abroad. A lot of weird stuff. Sometimes I feel like I'm running a small logistics company. Yeah.

And I will say, so I know it's the importer of record who actually pays the tariffs. And is supposedly supposed to get the refund. However, I've had a few instances where like the postal service will deliver something to my house,

especially in Connecticut, and while they're there, we'll say UOS like $50 in cash as a tariff payment. And I'm literally standing on my door, paying out cash, and it's going somewhere. So I feel very much like I actually have paid the tariffs pretty much

directly to the Trump government. Like there is something very expensive. I have some bad news to do. I know. The person who did that was a con artist who showed up.

It was said and they doped you.

“I think of that because I have never heard of someone having to pay cash.”

You're not buying enough from abroad. No, it's definitely true. I got the bill online. And then you can either pay online, or you can pay the postal guy. It's very strange.

I've never heard of that.

Anyway, everyone wants their money back. How that's going to happen. What the timeframe is is going to be major court fights. It was an article in the Walsha Journal this morning. And it said that the scale of the suits to recover it

is going to be, quote, the same level is that is bestest levels, which famously was, you know, multiple decades of lawsuits. Also gave birth to an entire portion of the legal industry. Lots of messo-thelium out lawyers out there. Some time later, I'll tell you I was briefly part of that industry as a data collector for it.

That's interesting. Yeah, it's fun. Anyway, we got to figure out how it's all going to happen. Because we know all these big companies. They want their money back.

Of course, you know, there's new tariffs already. The Trump administration after losing one tariffs. They're like putting in a different one. That's probably going to have court fights, et cetera. We also know that there was a popular secondary market in claims that Walsha

banks for facilitating. And so this is going to be a mess. It's probably going to stand for years. We got to figure out how companies are actually in the process of getting their money back. And whether they'll ever see it or whether it all go to the lawyers.

Well, this is the other thing. I know you and I live in perpetual fear of paperwork. Your bureaucracy and this in particular just strikes me as like the biggest nightmare of paperwork and bureaucracy. You know, for some of the tariffs, you're like calculating them by like the proportion of like the tariffed item in the thing you're buying. So like stealing aluminum.

How much of this thing is actually steel. It just seems like a nightmare. The whole thing of custom seems like a nightmare still very antiquated. We got to learn more about this nightmare about this chaos. And who do we talk to when we want to learn more about not the theoretical stuff that about trade that you know economists talk to talk about, which I love them to.

But the actual nuts and bolts of moving things of course. The perfect guest Ryan Peterson, founder and CEO of Flexport joins us today. So Ryan, thanks for coming back on Ublas. It is great to be with you and Tracy that person may have been an impersonator of a postman.

I tried to be a one for Halloween and you can't buy a postman's out for that.

I made friends with the mailman and he gave me his the borrow, but he was like, I will get fired if anyone finds out. Guys, I'm just going to be very clear. It wasn't a scap. The guy had my package. I had the bill.

I've received the package. Customs isn't going after me for unpaid bills. It's just weird. It's weird.

“But I think it speaks to like a lot of Americans will feel like they have paid these tariffs extremely directly.”

All right, Ryan, let's just start a big picture. You work with a lot of companies, etc. February 26. What do they all up to right now? Everybody wants to figure out if they're going to get a refund.

That's the big question. And if so, when and how? And what we've been telling you, so Flexport is a one of bigger customs brokers in the United States. And I think the most automated one of the best systems for calculating this stuff and all that.

That's the only sales page I'll do here.

It's a lot. So that is the giant question. They also want to know, hey, can I sell this now? You didn't mention the secondary market. That very interesting fact.

Fun fact there is that that was those were trading it about 25 cents on the dollar three weeks ago. And it went to 52 cents on the dollar on Friday or at the same day of the Supreme Court. Markets moved very fast on this stuff. So a lot of the companies I talked to in the last week have said the CEO said, Yeah, they would sell it 70 cents on the dollar today.

And they're considering it at 52 cents. So I think that market's really going to heat up. But yeah, those are the big questions to ask. And I do have opinions.

“I think I believe I have a very high degree of certainty, like ordering on certainty,”

Conviction, ordering on certainty that there will be refunds. And I don't think it's going to take that long. I think you're going to see refunds this year. Would be I'm going to put my name. My reputation on the line with that prediction.

Well, okay. So the Supreme Court. Not for you, Tracy. Sorry. I don't know.

I've already resigned myself. I need to hire a customs broker actually is what I need to do. Someone like Ryan, but okay. So the Supreme Court struck down the majority of the tariffs. But the thing they didn't do is say like what happens next?

How do refunds actually work? Do you get a sense of like, did they have any idea of how it should work? That they just didn't say or like they're just leaving it open to who exactly to decide the process of how this actually happens? Yeah.

So little backgrounds here. So this started in as a case in the court of international trade, which the administration lost. It then went to the appellate court, which is the level below the Supreme Court. In the appeal there at the appellate court.

The plaintiff is company called Voss. Voss something. But I forget I should have it. But there the plaintiff is a small business that was suing it. And they actually asked for a stay in administrative injunction to stay to say,

“"Hey, you have to stop collecting these tariffs while this gets work through."”

You lost the case. You just stopped now. And the DOJ in that appellate court filed a motion that said, "If we lose this case, if the government loses this case, there will be refunds." Like that's from the DOJ.

They filed a motion. You can read it in the document. They then lost the case there. It went to the Supreme Court. They lost again.

The Supreme Court has sent it back down to the original first court. The court of international trade. And said, okay, you decided that there's you know how the refunds are going. If you say anything about refunds, it just goes back to them. It's just if you read the thing, and I'm not a lawyer, okay, but I can read it.

And I make my own opinion, but the reason I really have certainties. I've talked to three different international trade attorneys who all told me 100% certainty that there would be refunds.

And I've never heard an lawyer say 100% certainty of anything before in my whole life.

So by the way, the company that filed, I'm looking at a Voss selections. It's a wine importer in New York. It looks like they have a nice website. Their website is very funny because it has all these beautiful pictures. And it says wines.

And then socky and other spirits. And then there's a big thing called fighting the tariffs. It sort of looks ugly on their website. That's epic. I got to buy some wine for this guy.

They've done everyone a big solid here. By taking this on. That's a future odd lot's gas right there. Yeah. We should actually talk about it.

This court of trade. It's not like some U.N. court. It's a New York based US court. Yeah. It sounds like it would be like the WTO or something like that.

But this is a little-- no, no. It's a US court where they send these types of cases. In fact, there was another case that was brought in the DC circuit case. Seek circuit court. And they bundled them together into the court of international trade.

Now, currently, there are over 2,000 cases before the court challenging I.E. But it's sorry, requesting refunds. It's a fact of challenging that they should get a refund. So I think those are likely all get rolled into one. And it'll go to court.

But the court of international trade has only 30 days from February 20th was when the Supreme Court came out. And they have 30 days to make a ruling of what happens next. So I think we're going to know pretty quick how the refunds that there will be refunds. Just because there is part of the reason that there is this confidence. I mean, the law is the law, I guess.

if you guys reverse this, we're going to have to make refunds. Is that part of the reason? Yeah.

“The lawyers have some confidence because they've already stated that as part of their arguments against.”

Exactly. I mean, you just think about, I look, I'm not a lawyer.

And you're always going to find some lawyers that will show some gray area.

But I've talked to three that had just pure certainty. You know, just imagine that you're going back to the same judge and you're saying, Hey, you know, you're trying to fight the refunds and your judge is going to get like, Well, you filed this paper, you know, this motion in my court that said you would give a refund. You know, the law is like, why are you not honoring that thing?

So, but there's there's complexities here. I'm not a legal expert. I'm more of a custom service expert. So, so maybe before we go any further, let's just talk about who actually is paying the tariffs when like, you know, an item gets made abroad and then it gets imported by, I don't know,

shipping company and then it goes through a customs broker and then it actually ends up at a store and then it gets bought by whoever who is the entity that is actually paying the tariff.

That's a quarter of record that supposedly is going to get this refund.

Yeah, that's the legal term for it is the importer of record and it's generally a US business. In your case, you did as an individual. You may or may not have been the importer of record on that trend. Yeah, I'm pretty sure it was like the actual shipping company. Yeah, whatever.

“With small parcel, that was, that's what happened.”

And that's very relevant because FedEx this week sued the government for a refund. And my initial reaction was like, wait, I don't understand like FedEx doesn't pay the tariffs. Their customers do, but it turns out for a small parcel, what I did, I'm not in the small portion of business, small parcel business. I didn't realize this really, but that if you're getting a parcel delivered,

although you are sent to tariff bill by FedEx FedEx is the importer of record. They pay the tariff.

So the refund comes to them.

They don't have to give it to you legally until they'll probably get its class action lawsuit by a bunch of traces in your friends and everybody else out there. Or it's also just brand damage if they get the money from the government and don't do it. I don't know, it seems like a bad look. So that's the case of small parcel.

You're importing containers. That's the business that we're in, ship large volume stuff. The importer of record is a U.S. entity, but it doesn't have to be. And actually, in the United States, UK Hong Kong, are the only countries in the world if we want to count on Hong Kong as a country.

The only places in the world that allow non-resident importers. So it's a foreign importer of record. Until April of last year, that was about 9% of U.S. trade. Since April, it went to 20%. Is it been an explosion of companies, 11% of trade flipped to where the foreign company imports it.

And so actually, about 20% of the refunds, I don't know in dollar value, but 20% of the companies getting a refund will be foreign companies. And that's nothing who's going to piss Trump off worse than that. Yeah, literally going to wire this money overseas. Can you explain what changed since liberation day such that it made sense

“for a lot of foreign companies to establish themselves as importers in the U.S.?”

Yeah, so what changed was a massive incentive to commit fraud. And if you're a U.S. company that was buying goods from overseas, you have to pay the tariffs, right? And you declare your goods, you pay the tariff as a percent of the value of those goods. But if instead, you say, hey, I'm just going to buy the goods in the United States from my factory.

And they'll take care of the tariffs. And that foreign company can just undervalue the goods and say, hey, this thing that, you know, it's actually only $10,000, not $100,000. And you just reduced your duties by 90%. Oh, and the U.S. companies are doing this in mass and washing their hands and say, hey,

I didn't know any better. I didn't know they would just, I didn't see any of that. I'm just buying the goods from this foreign company. And it's not my problem. And so we've seen a huge explosion of that. And all those people are not, those U.S. companies, by the way, they don't import anything. So they're not getting any refunds at all, and I don't feel bad for them.

Yeah, you got to imagine when you have something like these tariffs come into play. You're going to see some creative or creative, you know, with for listeners with air quotes around there. Yeah, and where we started Tracy was, you were talking about an individual case where you actually bought something from abroad. But of course, the massive things is that you just buy it domestically from a company. They did raise their prices for the tariffs in a lot of cases.

They're, you're not going to get any refunds, but the really interesting shake down that's happening is, okay, let's say you actually are a wholesaler and you sell the Walmart target these types. Your tariffs went up, you raised prices. Walmart, I talked to a company last night who's a big seller on Walmart wholesaler. And they said Monday morning Walmart called and said, hey, we need to talk about his tariff refund.

Yeah, because they, you know, they don't have a legal obligation to give money to Walmart,

Right, right, so there's some influence they could exert.

Actually, this reminds me, so one of the things I was wondering, and again, this comes from my personal capacity of bringing strange items into the US. But I bought like an antique box recently and antique some pretty sharp supposed to be exempt from the tariffs. But I still got slapped with a tariff charge because the exporter, the person sending it to me, did not label it as an antique. They labeled it as box, which was very, there's a box within a box. It was very annoying and so I got a big tariff.

“How much flexibility do importers in the US have over like the actual labeling of the items that they're bringing into the US?”

Is that one way that you could potentially, you know, try to lower your, your tariff burden fraud advice. Yeah, it is, it is illegal. So you, it's product has one and only one harmonized classification we call it harmonized schedule code.

It's a classification that said it is not always obvious that what the right one should be in the whole art of classification.

It's a very difficult and it, but is illegal to choose your classification based on duty rate. You know, you got to choose it based on what's correct. Now, if the correct duty rate should happen to be lower than the incorrect one, then you're doing a great job at life. And so that's a whole, that's a whole art in science is how do you make the case prove it that you, that you did in fact get the right HS code classification. Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made.

And I'm Caroline Hepkin in London with the hosts of the Blueberry Day Bake Europe podcast. We're a barely every week day keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy.

We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tackle markets, you're hearing it while it happens. It's smart, calm, and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7 a.m. in Dublin or 8 a.m. in Brussels, Berlin and Paris.

On Apple Spotify, YouTube or wherever you get to your podcasts. I want to talk more obviously about the logistics of the next several weeks and months about how this is going to be. But just in terms of maybe not necessarily fraud per sale, though that was very interesting.

What else have you seen basically since last April in terms of companies rerouting any of their, you know,

“What are the big trends in terms of restructuring the direction of the supply chain?”

Because part of the question to my mind is going to be with ongoing uncertainty about the future of tariffs. And there's already a new tariff and Trump made try to restore the old tariffs and aggregate through other means. And so forth, have there been changes and trade flows that you expect companies are just going to keep. Because at this point, this is the new normal and it's not sort of worth going back. For sure, lots of manufacturing has been moving towards Southeast Asia and Latin America, kind of the two big winners, Turkey,

a few other locations where you're seeing stuff that can shift move. I think the most interesting and not immediately obvious, the most interesting trend has been that it's actually in many cases. Chinese companies setting up factories in these countries. And so it's like literally you're working with the same company you worked with before and they've cloned the line. In many cases, they've sent Chinese workers to manage the line.

Yeah. And so it's not that as far as the money flows, like it's still kind of going straight back to China and a lot of those cases. People are frustrated because the quality is just a lot worse. It's not easy to just pick up shop and move the manufacturing. When you're just adding layers of cost here, a lot of what's happening is in order to change the country of origin. It's not just you can't just ship it to that country and then ship it to the US.

That would be called trend shipment and the US. One of these recent executive orders did this like new tariffs on trend shipments. It was just a ridiculous concept that shows that the government doesn't understand their own rules because you just ship it to Vietnam and then ship it to the United States. It's still a product of China. So there's no tariff on trend shipments.

It's just the tariff on the Chinese goods. So that law was non-sensitive. That executive order was totally nonsensical.

“You have to actually create and show that you have trends.”

It's called substantial transformation. You have to show that like, okay, I've assembled products in this country. It's not a reality enough value whether it's through labor or other components to make it a product of Vietnam.

And then transit time, too, because Vietnam is further away than China. There are less direct ocean sailings, et cetera. So it's been very difficult for people to navigate. I said that would be my last sales pitch earlier, but we had to have a free tool for this as well. It's an atlas.flexport.com.

You can see the transit time between any two ports in the world. Like the actual like how it moves. So this has been quite helpful for people to go navigate. And tariff stopflexport.com helps you see what the tariff rate is. Always be pitching, Ron.

It's fine. They're free tools. I don't feel like that's fine when you're on service. So one of the reasons the story is so interesting is obviously there's a logistical element. There's an economics element.

But there's also this political element. I feel like all of economics nowadays is pretty political. But in any case, you know, Trump has said that the American consumer doesn't pay the tariff. And yet it seems we are very much about to talk a whole lot about how much money American consumers might be owed from tariff refunds. Do you get the sense that any companies are sort of caught between a rock and a hard place where, you know, like maybe they would like to pay out some of their refund to their customers.

But at the same time, they also don't want to make huge announcements about returning money that Trump says was never taken away in the first place.

Yeah, I mean, it's definitely those the FedEx UPS, DHLs of the world that are in that condition. U-SPS will be an interesting one. I'm not sure if, you know, it'd be interesting to go look at those parcels he didn't see. Was it actually U-SPS or was it FedEx? Because if it was U-SPS presumably you are the imported record, but maybe it's U-SPS.

I'll be kind of a crazy case actually. If U-SPS doesn't give back the money that they charge Jews, that would be a great class action.

“Yeah, those are probably the ones, but it's really just like a brand and business question more so than a legal one I think.”

Can you get a want to piss off the Trump administration? By the way, I might just spend the rest of this conversation only half paying attention because I'm now playing at atlist.flexport.com. It's really cool, like clicking all these ports and seeing all the routes and seeing how long it typically takes from one route to another.

Like, yeah, it's amazing. I think you've done this very helpful. This is really fun website.

You built it up. Global trade has been this mysterious black box for centuries and now you can just see how it actually works, where did the ships go? It's like the bus routes, you know, what ports to stop that, how long do they take? No, this is a really fun website, so thank you for plugging it. So, okay, tell us actually about, I guess because you're highly automated and digital, et cetera.

Do all companies have really good records on this stuff? Is it very clear just from a sort of over the last year? Would you say the vast majority of companies know exactly how much they've paid on them unambiguously? I would say they do not, but they can very easily. So, the US Customs Technology System is called Ace Automated Commercial Environment.

Customs brokers love to complain about this is like healthcare.gov, like times a million in terms of debacle of engineering problem.

But it works, it took them like the decade longer than it should have to launch the thing. And you can every importer that does entries like commercial customs entries, not the traces of the world shipping a package to themselves, but like real customs entries of formal entry. All those entries are available to you, so you can see your past history.

“You have to just go to, and you have an ace account if you don't, you've got to go create one.”

And if you want to refund, you must have an ace account. They've until about two months ago, no, until February 6th, all refunds were done via paper checks from the Treasury Department from Customs. And we, a Flexport, has gotten over $900 million for the refunds for our customers in the last five years from Customs, one of my most proud life achievements. And all of those came via paper checks, and many of them got lost in the mail. Some of them got cashed by scammers, et cetera.

So this was on February 6th, they updated so that now refunds will be electronic, which was actually maybe a sign that they kind of had a sense of what was here to come. But yes, your ace account does show you your entire past history of all your imports. And if you go to tariffstopflexport.com at the top, you can upload that and we will just show you exactly how much money you're owed. And we got about 70 Fortune 500 companies signed up in the last week. So to calculate these tariffs and CFOs are coming to look, as again, it's a free service, you can just go look up your tariff free funds.

Do you get any sense from your clients of, you know, I'm pretty sure they're excited about potential refunds, but do you get any sense of what they're going to do with them? Is it just, you know, fill the hole that was left from paying the tariffs in the first place or does this count as like a windfall payment that they could potentially hold on to and use to invest or whatever. Yeah, these are a sick and demented people who have an addiction to just buying inventory and they're going to just buy a lot more stuff and try to grow their business.

“No, I'm joking, but I assume that that's what'll happen is you, everyone's an optimist, you get a lot of money.”

Most lottery winners go broke, although that might not be, it might be an urban legend, but I think they will go reinvest in their business in ways that may not make sense that I've been advising people.

One of the things I think I saw was that in his latest truth, social post he said 15%, but that actually it's 10 like the actual formal thing is 10% what is the current state of tariffs is you see them.

“It's currently 10%, the section 122's 10% date was a legal limit of 15 and that's what he did the next day. First he announced 10 on Friday after the Supreme Court, like an hour or two after then the next day on Saturday went to 15.”

I thought he was going to wait at least until the hockey gold medal match and just like if Canada won then put the 15% in, but like he jumped the gun on that.

But it did he put the 15% on because what is the did, but he did it. I think true social or some other post that's not how the laws work. So you have to actually publish it through the code of federal regulations and they haven't done that yet. So we're waiting for like official word, which, you know, usually it's a couple of days lag from when he says something so it's still 10% as of today, but I would expect, you know, maybe by the time this episode, Arizona goes to 15. Tracy, did you know speaking of the gap between announcement and formal thing that technically Kevin Worsh hasn't been nominated yet?

Because there's a part, yes, like send it to con, it hasn't been sent and his odds on poly market were at 99% the day after the announcement and they're now like 96% so people are wondering what's up with anyway just going that out there.

I should just say we're recording this on February 26 because again, all of the stuff seems to change day by day if not hour by hour.

“So that's very fluid. And the section 122, it's the section 122 of the Trade Act of 1974 and that's what gives the, that's one of the several tools. I would say that Trump probably he lost IEPA in the Supreme Court.”

He has at least four other acts of Congress that have delegated trade, a tariff authority to the president under certain conditions. IEPA was the one that they never been used before for tariffs, always for sanctions and outright bands on trade that the reason they liked it, it was under their interpretation, it gave him blanket authority just to do what they wanted, whatever they wanted on demand like he could just wake up in the morning and just like you get a tariff, you know, you look out on the wrong way and you get a tariff.

This seemed like it wasn't Switzerland specifically, right, didn't he say specifically we just annoyed, but okay.

No, I mean that was basically what he was doing, Canada a couple of times, et cetera, so the other ones require they have much more formal mechanisms that will require like the commerce department or USDR to do some recent, you know, do something and go run a report, go demonstrate that in fact this country and this sector, being anti competitive and they're doing something. They're doing something and then punish them. Now, 122 is the one that he put in. It has relatively blanket authority, but it has it has two limits on it.

One is that it's a maximum of 15%, which we just talked about and the other is that it's a maximum of 150 days. And now it'll go until July 20th of this year. And so then what you should expect is like between now and July 20th, that he was he'll be using these other mechanisms of which there's section 301, that's the famous China tariffs from his first term was section 301 tariffs those have not been challenged. He's been able to maintain those and then section 232 and 232 is on national security grounds. That's what the steel and aluminum tariffs have come in on that's not getting challenged or if it has they won the case or will win the case it's reasonable to say that steel and aluminum are not important national from a national security perspective.

“However, he also used section 232 to impose furniture tariffs on national security grounds and I think that's a little bit of a stretch personally.”

Couches comfy couches are a security issue. I imagine on July 20th what's going to happen is we'll have like a one day tariff Jubilee or a 15 minute tariff Jubilee and then they just get re-extended for another 120 days, right? That was my prediction. I think I talked to a couple of trade lawyers about that prediction and they told me that yes, he might do that, but there's no way that that would hold up in a court. So. Interesting. Okay. It's one thing what Trump does versus what a court finds to be legal. We'll find it.

This is Scarlet Phil and I'll Paul Swinney inviting you to join us for the Bloomberg Intelligence podcast. Every day, we harness the power of Bloomberg Intelligence to bring you deep dives into the companies that are moving markets from publicly traded companies like Apple to those that are privately owned but known by everyone on earth like open AI. Now, I have to build Bloomberg Intelligence to what it is today, Scarlet and now our analysts are the best in the world covering more than 2,000 global companies.

And we do it all live each week day, then bring you the best conversations in our daily podcast. So be sure to search for Bloomberg Intelligence on YouTube, Apple Spotify, or anywhere else you listen. Listen in the afternoon on your way home from work to catch up on the market news you missed during the business day. That is the Bloomberg Intelligence podcast. I'm Scarlet Phil. And I'll Paul Swinney. Subscribe today wherever you get your podcast.

Going back to the way these tariffs were originally described by the administration. The whole idea was bringing jobs and industry back to America. And like some of the justifications seems to have morphed since then at the state of union address

“Trump was talking. I think about how he used tariffs as like a tool of political power to influence countries and get them to do other stuff that he wanted.”

But again, when you look at your customers, do you get the sense that these tariffs have been successful in their original goal in shifting economic activity back to America? It's a little hard to parse out. I mean, like a lot of our customers are important goods. So they're not the ones. The exporters. You know, I've met as many companies at export that said that these tariffs actually hurt them because they import components. Right. And it makes it uncompetitive. You import a component. You got to pay a duty on it.

And if they were to put that factory in Mexico, they wouldn't pay the same duty. They could import the goods in there. If they're selling in the US fine, it's like one way or the other. It's the same. But if you're selling it into Europe or you're shipping it abroad, then it really makes that manufacturing less competitive.

It's probably a little hard to parse out there because we're going through this incredible AI capex build out that, you know, there's a lot of industrialization happening, a lot of a lot of stuff like

“In general, in theoretical grounds, like tariffs are good for manufacturing in purely economic theoretical world, but these things are like, I think much too complex to be”

centrally managed by the state is like the great lesson of the last century. I do think the point about terrifying imported components for, you know, because we don't in theory, we don't want to just build stuff here. We want to build complex high value. And then sell it to other people and sell it supposedly. But yeah, if you're input costs go up because here's this one piece of metal or whatever it is, then that does make the cost of doing business higher in the United States. But on the AI, I'm sure it's just sitting aside all the tariffs since you brought up the AI boom.

That's creating its new different trade flows, incredible imports from Korea, right, for memory chips.

And those prices are going insane. And I think I saw a stat, just the pure level of importing that we're doing from Taiwan is just staggering all because of chips, et cetera. But what else you're seeing interesting in terms of trade flows because of all this AI activity that's going on, or do you see any fingerprints of that. Yeah, you see a lot in the air freight market, especially because the one of the Trump administration crackdowns was the end of de minimists shipping, which was if you ship something less anything.

$800, you didn't have to pay customs duties on it. And that was just this huge boom.

“It had been 50% of the world's air freight. And so when that ended back in, I think it was in May for China, they stopped, they ended that program.”

All the experts, including me, went on the record and said, hey, the price of air freight is going to collapse. Because it's 50% of the world's air freight is a de minimists shipments from Asia from China mostly, and that's all going away. And so the price can collapse. Well, it turns out price of air freight has stayed stable, stayed high because there's so much so many components for a data center build out, getting flowing around the world. It's more than made up for the drop from the de minimist shipping.

That de minimists exception, the $800 exception, that always reminds me of, you know, the charts that you see of men's like self-reported heights, or like no one is five a or five nine.

And everyone is either like shorter or five ten and above, like all the shipments were either, you know, like less than 800 or a lot more than 800 and like nothing just around there. Let happen though, because I thought they were going to kill like Cheon and Timu and some of these things with the de minimist stuff. Did any, what happened with those businesses? They're doing pretty well. It turns out it wasn't just tariff arbitrage, so that's also part of the story on the air freight market that we got wrong is like they're doing okay.

And that one thing they've set up fulfillment centers in the US, they've set up some pretty big automated networks that are probably like 20% of the size of Amazon's network now is these fulfillment centers for Chinese. He come run by Chinese, he commerce companies is really a massive kind of an under-reported thing there. And they're also, they're still flying it from China, they're paying the duties. One of the most interesting facts I learned this year actually is that Cheon does, they've 40 billion of sales, 40 billion of revenue last year.

And no purchase order that was made from Cheon to its factories was more than 200 items.

Whereas if you go to like a lot of websites or like retail stores or always running a sale because they got to the bought too much stuff and are dumping it.

So the business model actually has some attractive features for it. And I had we had started to build that service. We were offering it for a lot of we do still offer a similar service we can ship from overseas and then we'll just inject it directly to the postal service or other last mile carriers. We stopped investing there because I was like this is going to die with the end of the minimize, but probably a mistake in hindsight we're seeing like actually that model is still working.

Actually that reminds me when you look back at gosh, I can't believe it's only been like a year basically, but when you look back at the past year and your customers.

What was the biggest differentiating factor between those who handled the tariffs well and those who didn't was it just like size and their ability to squeeze out concessions from suppliers or was it I don't know. Data records and really good lawyers I guess what did you see that made a particular company handle this better than others.

“Yeah, I mean you have to look probably within an industry because they're certainly industries are just have sectoral advantages or disadvantages like hard to move electronics out of China.”

And then some of those industries were exempted from the tariffs actually you know who did the best was the guys who went to manage to get a meeting at the White House and shake hands and convince them you know like Apple don't text don't tear up the iPhone but that was a very privileged small number of people that had that kind of access. All of the things being equal I think that like more entrepreneurial companies that could just move quickly and make good decisions and just like all right cool we're going to set up manufacturing in Mexico or Latin America or some of these places and actually move relatively quickly.

It's not just speed you got to make good decisions you know like people who moved to India and a hurry and then found out India guy with a 50% tariff like not doing that great so maybe some of it's just locked too. I mean it's very hard to forecast how the.

“How this thing would did play out and what's going to happen next is kind of anybody's gas so sometimes the best thing to do is nothing and just let things go stable I met a couple of companies that said that was their plan.”

That's kind of bold and I like it on some level so okay you're fairly optimistic that this is not going to take as long as perhaps some people say but what is.

What are companies doing right now to walk us through the actual nuts and bolts of getting the refunds and what's happening right now the timeline works and what they have to do to actually get them and so forth walk us through that. It's a bit of a technical thing but you guys have a nerdy audience so yeah I think the way that it'll work it's up there's first of all there's someone certain you have the timing is going to work if there are refunds at all is still not guaranteed although I feel pretty high certainty the way that it's likely to work is you're going to need to pull that ace report that was I was talking about earlier pull it from customs calculate how much your own you then are going to need to file it's unclear if you'll need to file protests typically the way that works to get a refund is you go you file a protest you make your case to the government that hey we got this miss.

“We got this miss classified we are protesting and we and you'll get a refund that's typically how it works and that's how we're set up to go do that is go file these protests on your behalf to go.”

So we're putting that program in place right now for companies to go to make that easy take away the paperwork the piece that's a little bit more sophisticated where people are selling these things in the secondary market I mentioned earlier so there's at least three big banks that are out there I don't know if they're big but there are three groups that are out there at least three there's probably more that are buying. And things like I said the market price went to 52% so there's a lot negotiating right now I'm going all right what's this time value of money what's the x what's your relative certainty of when and how this is going to play out that's a market that I'm tracking very closely that's for those guys have only.

We're a company's refund is at least $10 million one of the things I like to be able to do is say hey we can pull a bunch of these guys to do any of the bank have any of the banks come to you and say like rather than trying to get gather all of these you know tens of thousands however hundreds of thousands of companies do they just come to any of the freight brokers and say like. Yeah until last Friday we have we talked to all of them until last Friday there was just a little too much uncertainty for us to put in the effort and like to build the thing we built a calculator that's why we're able to go live with the calculator.

You know the same day as the refunds went live because we've been building that but as far as the processing we didn't really invest in building that capability until Friday we kicked off those you know like in earnest so that's I'm hoping to be able to build in a hurry as I really like to be able to pull these things and I talked to so many companies that said hey if you can get me 70% or 60% even I would do it tomorrow so that would be I think we could.

If I value the thing differently than you are there should be when when.

Well this is what I was going to ask so just to be clear like those claims on territory funds are trading at 50 or 60% at the moment but.

“We are expecting the full refund amount to actually come back right there's not a plus legal fees I think.”

Well I know my legal fees but plus interest you're supposed to get six percent six I think six percent is the current rate on that six percent in your list so yeah. When now we're saying we are expecting that's me and my team and some lawyers I've talked to but the brands. Probably aren't expecting it that high or else they wouldn't sell it or 60% or they need money right now. Just a vacation from not getting the full refund if there are legal like the totality is illegal right. Well this the full refund would come but in that case they would go to the person who bought it from you not you so it's just a time value of money and a uncertainty question that someone's willing to take a lower rate.

But yeah I think I personally I think you'd be selling for 60% you're probably leaving money on the table just wait a year I mean 40% for a year is a pretty good return.

Should set up a little side hedge fund.

A little side pocket. So I'll sell you my chance. All right I'll maybe we'll do a little trade here and write about it Ryan Peterson thank you so much great to catch up with you. I'm sure there will be more opportunities and the coming months and years ahead of all this but thanks for coming back on our lives. That was great to be here again. Thank you.

Thanks Ryan. Tracy we should do an episode on the the new delivery network that's built being built by the Chinese companies inside the United States. I don't know that existed at all. I think that'd be fascinating. 20% is already as big as Amazon's logistical network that's pretty wild.

Well this is why you know I was asking a few questions about like how you actually classify items and things. Whenever you see this kind of sweeping rule change I feel like you get a very immediate reaction from the people who are paying it. And some of them get extremely creative. It's not illegal right and it's fascinating to look at some of those solutions. Yeah no I like the I mean it makes obvious sense.

It's all I sell this thing for a hundred dollars. I'm going to set up a company in the US that I sell it to for a dollar. Right and then the that company sells it for a hundred dollars to you know or tries to. That's business. It's also illegal.

It's business. But the fact that you see it's like that it shows up in the data right that it's like all that a foreign company can theoretically. And he can theoretically apply for the refund and et cetera or can establish what was the importer of record. Then it can afford company can establish itself as the importer of record. And then it shows up in the data like that shows how much creativity was underway since liberation day.

I mean just from a broader macro perspective and I know that wasn't the focus of this episode but maybe we'll do one at some point. It is going to be really fascinating to see what refund recipients actually do with that money right. Yeah I feel like if you're corporate analyst at the moment or if you're an investor like it's going to tell you a lot about the direction of that particular company what they do with that money.

“I think a big question is just going to be how many announced sales or something because like there's going to be some pressure to refund money to consumers right.”

And it'll be interesting to see if any do some sort of nominal rebate of some sort. I mean obviously they're not legally obliged to but you know I think a lot of people it's going to really annoyed people if. Especially if there are categories where it's obvious that consumer prices went up because of the tariffs or if companies in some cases may have. And we're putting a tear of surcharge on you right and they might have spelled it out of the some sort of bill. Well they probably did because they don't want to be seen a lot of racing prices.

So if you were the type of companies like we weren't racing we didn't want to raise prices we just have to we just so we're telling you that part of this. Fifty dollars that you paid ex amount is a tear of surcharge that we're applying. They better give you a refund otherwise that's going to be really annoying. I guess that's annoying. That's like a defect of windfall for them.

Well you know who handled it pretty well.

“Well things considered at this moment in time it seems like they handled it pretty well at Costco because I think they didn't they explicitly said they weren't going to pass on the tariff charges to customers.”

They were just going to like eat the loss but also files suit against the company administration saying the tariffs are illegal.

And so now you know they get the refunds they don't have to like actually pay them back to customers but they don't take the brand hit from not doing that because they never charge them anyway.

But you know in theory they could have held a price steady and maybe in the alternate universe the prices would have come down right. So sure we'll see.

Yeah yeah totally. I'm only saying that because I'm a big fan of the giant Spanish hands that you call it at Costco. Which were presumably terrible.

I guess but this is the first year I ever bought a Costco ham so I can't tell you.

Is it good? It was so good. I can't tell you what it was the year before if it actually went on. But can I tell you a little life hack for the people that are still listening to the very end of the conversation. If you ever like show up at a party and you bring a Spanish ham you people just love you and like you know there are a couple hundred dollars or whatever. But there's a lot of food in the Spanish ham and if you're the guy who shows up at a party with a big Spanish ham on the Holy on the spit or whatever it is.

Like that you'll be the life of the party. It is a very strong move. A friend of mine did that and everyone loved him.

“I think that's an excellent idea. I bought my husband one for Christmas and I will say I think it lasted us like a good three weeks and we ate a lot of ham.”

You just leave it out there right?

Yeah, you just do it's great.

Yeah, they preserve very well. Some cheese and ham for dinner for like three weeks. Just keep carving at it. Yeah, it actually is. All right, shall we leave it there?

Okay, this has been another episode of "The All Thoughts" podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wyzenthall. You can follow me at the store. Follow our guest Ryan Peters and he's at Types fast. Follow our producer. It's Carmen Rodriguez at Carmen Armin. Dash will benefit at Dashbot and Kale Brooks at Kale Brooks. And for more odd-lots content, go to blumber.com/adlots.

Revid daily newsletter and all of our episodes. And you can chat about all of these things 24/7 in our discord discord.jg/odlots. And if you enjoy odd-lots, if you like it when we talk about Spanish hands and the teriffs, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free.

“All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there.”

Thanks for listening. Hello, I'm Michelle Hussein, and for more than 20 years, I was at the BBC. I'm from Afghanistan. Hello, I'm Michelle Hussein, and for more than 20 years, I was at the BBC. Actually, I'm from Afghanistan.

But all the time I was delivering the headlines, I wanted to go further than the news of the day. To spend more time with the people shaping our world.

“And that's what I'm doing here on this podcast.”

Speaking to people from Nigel Farage, I'd love you trying again. I'd love you trying, I'd love you trying, I'd love you trying. To tech journalist, Kara Swisher, and the tech industry is running wild. You know, they've gotten what they wanted, and they've seen a huge run-up in their star prices.

This will be a place where every weekend you can count on one essential conversation

to help make sense of the world. So please join me, listen, and subscribe to the Michelle Hussein Show from Bloomberg Weekend. Wherever you get your podcasts. Just as I ask interesting questions.