The Supreme Court struck down a bunch of Trump's tariffs. Now what?

Okay Cara, how do you feel?

“You used to use a, yes, I saw the news and I, I never thought this day would come honestly.”

It's like, was this Supreme Court ever going to rule on it, like, you know, we're going to be in this kind of like purgatory forever, but it has come, so I'm so happy. This is Cara Dyer, she's a small business owner in the US, and the big news, the US Supreme Court has said that President Trump's giant sweeping tariffs that he imposed early last year are illegal.

Done so. This is huge news. We're 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. Okay, 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 in tariffs, yes, absolutely, absolutely. So, like, okay, 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.

So far, the US has collected more than a hundred billion dollars under these now illegal

tariffs. That's a lot of rebunds.

“Yeah, it's like, right, yes, how do you know what to do, how to go about it?”

I don't. Yeah, but now is when they would have to start and figure out a process to get those refunds going. So, I'm also hopeful that that will happen, but they will be very clear guidance on how to get back.

Yeah. Yeah. My can tell a little digging on your approach, yes, I have to guess. Hello, and welcome to Planet Money, I'm Jeff Glow. And I'm Sarah once at it.

And I'm Mary Childs. About a year ago, the Trump administration tried to use a law that was not designed for tariffs to impose the biggest most disruptive tariffs we've seen in about a century. This morning, there's a free court came back and said, no, you can't use that law to impose tariffs.

Today on the show, why are the tariffs illegal? And what does this mean for businesses, or Kara, for the rest of us, are any of us going to get refunds?

“Yeah, and also, what does this mean for the Trump administration's whole tariff policy?”

And what's up with this new 10% tariff you just announced today? Also, a market for tariff refunds is already booming. All right, first things first, what did the Supreme Court actually say today? For that, we called up Georgetown Law Professor Kathleen Klassen, who is an expert on the law of tariffs.

We had her on the show back when Trump's big new tariffs were first getting challenged in the courts. She was the one who had explained to us, I'm fine, I need that basically Trump created these big new tariffs under a law that no president had ever used before to create tariffs. That law is called IEPA, 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, that 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 in position of tariffs in the U.S. economy. And today, the Supreme Court told us what they think about IEPA and how Trump has been

using it. Actually, the justices had a lot of thoughts about IEPA. There are multiple opinions, the whole thing is 170 pages. We know it was going to be long, but I had an 70 pages really as something. Yeah, so this decision is kind of landed on your desk with a thump.

It's a real thump. I was going to show you, I had printed it, but I printed it double-sided and two pages for sheet just to save the paper. Kathleen says the take away 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 IEPA, it doesn't literally say the president can impose tariffs. It says something much more vague. It says the president may quote, "regulate.dot.inportation," like the importation of goods. It was simply a question of does the statute IEPA allow the president to impose a tariff

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. Is that like a mic drop moment?

I can imagine the Chief Justice do with a mic drop. I don't think he did today. I wasn't in the room, but I'd be surprised if he did the mic drop. But he could have, he could have.

Basically, those are the most important words the Supreme Court said today.

It said those words in IEPA, "regulate.dot.inportation," they do not mean that the president can create giant, sweeping across the board tariffs on countries around the world. That is not what the law means, the court said. Kathleen says, "It is very, very clear. No ambiguity here.

These particular tariffs," she says, "are illegal over and out." So let me ask you the obvious question, which is, "are any of us going to get our money back?"

“I, you got a long, long road to hold there at my friend if that's what you're going”

for. No. Look, the Supreme Court today has said nothing about refunds. We don't have any guidance on how or if that's going to happen. So it sounds like what you're saying is, "I really got to talk to a customs lawyer."

Always good advice. And as it happens, we do happen to have a customs lawyer on speed dial. We sure do. Moreen Thorson, and let's just say today is kind of like her day. Oh, yeah.

I've spent 25 years doing nothing but nerding out on this stuff. And now I know way more than anybody ever wanted to know. Moreen is an international trade lawyer. She's a partner at Wiley Rain, who specializes in customs law. And we wanted to ask Moreen, "Yeah, sure.

How our companies are going to try to get refunds for all the tariffs they paid on the goods they've imported to, you know, settle to us."

“More importantly, though, what about regular customers like me and Sarah?”

Yeah, we've been paying tariffs indirectly directly on all kinds of things for over a year. Blueberries, dresses, toys, those lamps I got off Teamo. There you go. So like, what are we going to get that money back? And as you can imagine, we are not the only ones bombarding marine 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, okay, what happens next? Can I get a refund? When can I get a refund?

How do I get a refund? Greens 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. The tariffs that are now deemed illegal. So option number one, turns out customs actually already has a process to get refunds

on your tariffs because, you know, the US has had lots of tariffs over the years.

And there've always been people who have maybe overcalculated how much they owe in tariffs.

So companies can go to customs and say like, "Hi, excuse me." Can I get a refund on my tariffs? I kind of overpaid. Thanks. But there is a whole process to it and also a limited time window.

Up until day 300, you can file what's called a post summary correction where you essentially say, "Hey, customs, I messed up my original entry. Here's the new corrected documents. Please accept my correction." You can do an oopsie take-back-sees.

And oopsie take-back-seen? Yes. Okay.

“But what if you miss the deadline to do your tariff take-back-sees, oopsies?”

Marine says with these tariffs, the answer is not totally clear.

But you could always go to court. That's option two. You could just sue the US government. You could file a lawsuit that says, "Hey, I paid these tariffs. That's a pre-mort."

Trust said that these tariffs are illegal, so please give me my money back. In fact, a lot of companies like Costco and Toyota and good here, they started filing these tariff refund lawsuits even before this pre-mort made its decision. And now there's one more possibility that Marine talked about and this is one that it seems like a lot of people are hoping for, which is that maybe the Trump administration is going

to create some kind of official, easy-process where everyone to get their IE-butt tariff refunds, though that might take a while. Now, people might not want to wait, but everyone's sort of speculating and trying to figure out, like, trying to read tea leaves about all of this. So what about us, right?

Like, can regular people get a refund on the tariffs we paid on, you know, that lamp I bought? And Marine says, "Well, it depends. You actually pay the tariff directly to customs, or was it just like priced into your purchase." If you're like, "I think as a taxpayer and consumer that I've been paying more for kitty

letter since last year because kitty letter companies across the globe are raising their prices because of tariffs than probably not." Okay, but say one of us like hypothetically bought a fancy dress from the UK for their little

customs.

“Can I go to the customs window and ask for that refund?”

I bet it would be, right? Right, hypothetically. Marine says, "That's actually really unclear because this customs refund window we've been talking about.

It's not available to everybody and it was actually never designed to deal with this specific

kind of big tariff." But she says, "You could always file a lawsuit to get your money back." Yeah. I think we had planned it many are definitely going to have to sue, like just to see what the process is.

What happens? Right? This is the planned in many way. Yeah, what could be more fun than a lawsuit, Sarah? All right.

So I'll look into that. Yes. You're going to go looking to how we're going to sue the federal government. Happy, too. Okay.

Meanwhile, a lot of companies didn't want to wait for this Supreme Court decision or to figure

out if they were going to get a refund, so they found a way to get pre-refunded if you will. Our co-host, Mary Childs, actually talked today to someone who has been getting companies these pre-refunds, these refunds in advance, which is a whole brand new baby market. Yes, the market for tariff refunds, and there are hundreds of millions of dollars of deals

that have already been done in this little baby market. This person told me. Okay. So since the IEPA tariffs started, companies have been paying the tariffs all while knowing

“that they might get this big pile of money back, should the tariffs be ruled a legal, right?”

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. Like, 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 utteres 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 are also making outgoings to importers

and basically anyone that we believe has paid a tariffs since liberation day.

These importers, these companies are like, okay, we have these potential tariff refund claims. Does anyone want to basically buy this potential refund or part of it, meaning 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. Hedge funds. 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, I just want something, like 20% of my potential refund. Give me just 4k of it. And I'm obviously a hedge fund, Wes calls me, and I'm like, listen, yeah, I would love to buy that potential future money, but the Supreme Court might say it's legal, and

I will get nothing. So I'm only willing to pay like 20%. And I might get 16 grand in profit. It's not bad. Weirdly, the seller in the buyer were very aligned when this baby market was popping

up. The market was oddly well-defined from a very early stage in this. And one industry in particular Wes says was really into it. We found that there was a decent amount of interest in the retail, apparel, and footwear sectors, which I suppose makes sense that the best rationale I can give is I think that

they were acutely impacted by these new tariffs, and they were looking for the ability to raise cash immediately. Raise cash so they could go do normal corporate things with the cash they just got selling the tariff refund they may or may not have gotten in the future.

these claims are now way more valuable. Wes says the prices have jumped. It's not at 20% anymore.

“Price now is 40 is sort of where we're seeing bid shake out.”

Like hedge ones are buying the potential refund for 40% of what it will total if it happens. Things are very much influx. This decision was only just recently made. We're still trying to shake out where offerings are coming in. We're getting incoming from a number of different importers as we speak.

It's still a discount of 60% because of what a mess it's going to be to try to get this refund and how long it will take. That's what the hedge funds are buying, all that complexity, the uncertainty, the headache for the potential payoff. The really is no modern parallel for the magnitude of this unwind, and I just don't see

the administration turning around in short order and immediately issuing refunds. Like having all summed it up as mess. Yes exactly, that's a great quote from today. After the break, today, President Trump added new tariffs and will tell you go. 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 Klauson, our trade law professor, ran through a whole list of them with us last time shoes on the show.

Most of these statutes go by their three digits.

“So if you want to sound cool in trade, 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 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 and they experienced its renaissance.

After Trump was elected for his first term, he started using some of these three digit

laws. Section 301, and Section 232, to create new tariffs. The Supreme Court's latest decision doesn't touch any of the tariffs created under those three digit laws. For instance, right now we have a bunch of specific tariffs on some Chinese machinery and

minerals and also footwear. Those tariffs were created under the Section 301 law. Those tariffs are still in place. But if you are a president who loves sweeping tariffs, most of these three digit laws have a major limitation.

Most of them only let you create specific targeted tariffs. For instance, Section 232 is all about protecting national security. And the process itself takes a while. There's gotta be a report, just a lot of administrative work. The appeal of creating tariffs using IEPO was that the process would be much faster.

So if the Supreme Court would let the president use IEPO, like he wanted to use it, he could create a bunch of tariffs with just the stroke of his pen. And now, it seems like there really isn't any law that would give him that kind of power. Or is there?

At this press conference on Friday, Trump announced a new across the board 10 percent

tariff under a different law with a different three-digit number. He said Section 122, so what is going on? That's the big news of the day. Kathleen says, yeah, welcome to Section 122. It allows the president to impose a tariff of up to 15 percent

for a limited period of time to address a balance of payments deficit. She says this is another one of those economic laws written during the Cold War. And unlike some of the other three-digit laws, Kathleen says Section 122, in theory, lets the president create a lot of tariffs really fast.

“As a president ever used, Section 122, to make tariffs?”

No, no president has before. Never.

That has never been done before.

But, Kathleen says a lot of trade law professors have been expecting Trump to turn to this Section 122 law at some point. And there is a big caveat here, which is that tariffs created under Section 122, they are supposed to expire after 150 days. And the statute says that Congress can extend that period, so it does throw it back to Congress.

But I would quickly say that I think we have not been used, so we don't have any test case yet. Like, what if after the 150 days are up, the president just does it again? Makes another 10 percent tariff that lasts another 150 days.

Sounds like law professors have already kind of had hypothetical fights about this hypothetical use of this law. That's what we do best, Jeff.

“Now for Cara Dyer, the business owner from earlier, who, by the way, sells toys, all”

of this tariff whiplash, it is so exhausting to think about. Yeah, and the last time we talked to Cara, which was in the midst of the sort of rollercoaster of tariffs on China last summer, she was on the fence about whether or not she was going to be able to afford to put in large orders of toys, because she didn't know if she'd be able to afford the tariffs on those orders.

And she was hopeful that maybe China or the Chinese manufacturers she worked with would help chip in. I remember at one point you were like, maybe China will like share in the cost of the tariffs. Not not happen. 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 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 because like though, right?”

Yeah, tempting, but super risky, right? So it was like the factories in China that would say, like, we'll just say that there's only 200 dollars in that container. Yes, 500. Yeah.

But I didn't feel comfortable with it.

So we never did anything like that.

Wow. And it upswitching 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 writing hood storybook. She calls them her company is called Storytime Toys. Kids can read a fairy tale and then play in that fairy tale world that they build or like these little sets.

Red writing 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 on-mart to hide her. And so there's lots of fun things about that set. And when Kara tested out this set during her testing year, it did pretty well with customers.

So before the Supreme Court decision, Kara had actually decided to finally put in order

for a big container full of these storybooks. It's her first big containers since the tariffs first went into effect. That was 12,000 products. So we probably would have had a pay about $15,000 in tariff on that. And now it's just gone.

Go ahead. Yes. Yes. I mean, that's such a huge relief and cost savings, except it may not actually be the end of tariffs though.

And she knows this. I've just sort of been following along with the news and you know, what the administration has been saying in response to this, like, oh, we'll find another way. So I just don't know. I don't know if it's the end of tariffs or not.

I just today, I want to feel hopeful about it. But of course, the roller coaster is not over. Trump already announced today that new 10% tariff. And Kara, she's just pretty frustrated that she's had to reimagine her whole business because of tariffs.

Do you think our strategy rethink our finances? Definitely, I feel angry about that, especially when it really felt like just while it was going on, you didn't see any reason for it, where we're getting a better deal from China, you know, because we did this, no. In all, Kara says she only paid about $20,000 in tariffs because she scaled back on orders.

So not a ton, but that $20,000 first small business is, that's pretty significant.

And she does plan to try to apply for every fund. But I don't know. I mean, if I have to hire a lawyer, I'll have to weigh the cost of that, compare to how much I would potentially get back. But I mean, if they're illegal tariffs, we need that money back so that we can invest it

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