Billions in Tariff Refunds — Who Gets the Money?

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1:23Ryan Petersen:Today's number? 4 ,208. That's how many miles FBI Director Cash Patel traveled to watch the hockey final at the Winter Olympics last week. Mr. Patel drew criticism after he was seen chugging beers in the locker room. But to be fair to him, the best thing after a long week of protecting pedophiles is an ice-cold beer.

1:59Ryan Petersen:Welcome to Prof G Markets. I'm Ed Elson. It is February 24th. Let's check in on yesterday's market vitals. The major indices fell after tariff uncertainty resurfaced. Renewed AI jitters also rattled investors. Software companies were hit especially hard after a viral post from Citrini Research reignited concerns about AI's impact on the economy. Meanwhile, Bitcoin continued to slide and gold and silver both rose. Okay, what else is happening? For a fleeting moment, it looked like the courts had put an end to Trump's tariffs. In a 6-3 ruling on Friday, the Supreme Court decided that Trump can't use emergency powers to impose sweeping tariffs.

2:44Ryan Petersen:Stocks and treasury yields rose on the news. Trump then called the decision, quote, ridiculous and extraordinarily anti-American, and then he moved to plan B. Within hours of the ruling, he announced a blanket 10 % tariff on all imports. And then he said he'd bump it up to 15 % on Saturday. This time, he's leaning on Section 122 of the Trade Act of 1974, which gives the president authority to restrict imports for up to 150 days. Stocks gave back their gains on Monday as investors digested the whiplash. So many important questions remain. What exactly has changed here? What will happen with tariff refunds?

3:24Ryan Petersen:Will consumers and small businesses get any relief? Lots of questions here to help us answer some of these. We have a panel of experts today. We've got Peter Harrell, visiting scholar at the Institute of International Economic Law at Georgetown Law School, and also Ryan Peterson, CEO of Flexport. Peter, Ryan, thank you very much for joining us on ProfG Markets. Peter, we will start with you. A lot has happened over the past three days. Give us your initial reactions to the Supreme Court's ruling and also Trump's reaction to the ruling.

3:59Peter Harrell:Yeah, so we got the Supreme Court decision on Friday. I don't think the Supreme Court decision really came as a surprise for those of us who had listened to the Supreme Court hearing back in November. It seemed like a majority of the justices were skeptical of Trump using this 1970s era emergency powers law for his tariffs. So not really a surprise there. You could also tell the administration wasn't really surprised because while Trump obviously denounced the Supreme Court with his characteristic bravado, the administration was also quite ready to go with their backup plans. As you alluded to, within hours of the Supreme Court ruling, Trump had signed a proclamation using this other statute, also from the 1970s, to impose a 10 % tariff.

4:45Peter Harrell:He said on Saturday that he would increase that to 15%, although as of Monday afternoon, he's not done so. So I do think we have to see if he in fact increases it to 15%. It probably will, but we haven't actually seen that yet. That action, what's called a 122 action, will keep this either 10 % or 15 % tariff in place through late July. He can't use that statute for more than 150 days. And so the other thing we're seeing is the administration begin to spin the wheels on some still other tariff laws that could keep tariffs in place once the 122 action expires in late July.

5:26Ryan Petersen:So you mentioned that he puts the 10 % tariff in place. That's happened. Then he says we're going to go to 15%, but that hasn't quite happened. Maybe it will have happened by the time this has ryan i was looking at your x account you actually predicted that he would bump it up to 15 before he said he was going to do that you said that he's he's he's got it at 10 and then he said i predict that he's going to move it up to 15 you also made another prediction that we'll get to why did you say that and do you think it will still happen well 15 is the maximum of what he

6:02Ed Elson:can do and so you figure he has it in the back pocket left himself a little cushion to add some more later and uh i wasn't expecting him to pull pull the trigger as fast as he did i thought he'd wait a week until in my prediction i said i'll you know canada is going to do something to piss him off and then he's going to do it uh but uh turned out america beat canada in the go in the hockey game i thought that would be the funniest thing that could happen is if canada beat us and then he said all right here's some more tariffs for you but uh the other prediction you said you

6:29Ryan Petersen:said, you wrote, quote, 150 days from now, the tariffs will be paused for 15 minutes and then immediately reinstated for another 150 days. And this goes back to what Peter was mentioning here, that there is this 150 day timeframe and that's what's legal. You say he's just going to cancel and renew. Take us through that.

6:48Ed Elson:I like to hear Peter's take on that and other people too. I'm not a lawyer and, you know, there's nothing explicitly in the law that says it says you You can't extend it beyond 150 without Congress's approval. But if you let it expire and then put a new one in, surely it would get challenged. It might lose the case, but he could do it. I don't know. What do you think, Peter?

7:05Peter Harrell:There's one question about how do I think the courts are going to interpret the law, which is not really the question of what Trump will do, right? Because Trump's going to do what Trump's going to do. I actually feel pretty confident that if Trump tries this strategy of 150 days, expires for 15 minutes, another 150 days, the courts will throw that out. Now, it might take them a couple of months to throw that out. So Trump might, you know, get another couple of months of, you know, before the courts throw it out. But I think the courts would throw that out.

7:34Ed Elson:It's kind of an interesting thing here of like, you know, even with AIPA, even if you knew it was going to get thrown out and you knew you'd lose the Supreme Court case on Friday, he still got quite a lot of leverage from putting it in. He got all kinds of countries to come and make a trade deal with him. Most of those countries are not going to undo the duties that they dropped their tariff rates or lowered other barriers. And they're not going to they're probably not going to just turn around right now and drop it. It's sort of interesting to think of like, what are the rewards that Trump gets even from effectively what he did was break the law.

8:06Ed Elson:It's interesting to think about.

8:08Ryan Petersen:Well, what do you think this does mean for other countries, Peter, in terms of, I mean, they came up with these sort of semi-deals. They're more kind of spoken word agreements. And then everyone puts their tariffs in place. If you're a foreign government, if you're, say, Brazil or you're China or the UK or whatever, do you react to this news? Do you decide, OK, I guess we're taking the tariffs down or do you react to the 10 percent or the 15 percent? Like, what does this mean if you're a foreign government?

8:38Peter Harrell:Well, the first thing I would say, and I said this last year, that in 2025, the biggest true winners of Trump's trade war are the trade lawyers. I think it is going to be true in 2026 as well that the trade lawyers will be the one true class of winners. And so I think what you're seeing right now is the foreign governments are talking to a bunch of very expensive trade lawyers to try to understand what's going on and what they should do to game this out. Look, I think the question in some sense is in Trump's court in the following way. I think that if you are Europe or you are Japan or you are one of these other countries that has a trade deal, if it looks like Trump is going to keep your tariff rate at the rate that was agreed to or lower.

9:24Peter Harrell:Right. If you'd agreed to a 15 percent rate, if it's going to be a 15 percent rate or lower, I think you keep honoring the deal. Right. Because you don't want to piss Trump off. He might sanction you. He might. You know, who knows what he's going to do. Right. So I think you keep honoring.

9:39Ed Elson:He has these other levers. He can put Section 32, Section 301. He has other things he can go do. Totally.

9:45Peter Harrell:So I think you stick to it. Now, if what Trump does is use this as an opportunity to somehow hike rates, like if you if you were at a deal, if you're the UK and you have a 10 percent, you know, rate in your deal, and he's now hiking that to 15, I think that becomes a little more complicated question for you. But if Trump plans to keep the rates the same, I think most countries will basically continue along.

10:10Ryan Petersen:Ryan, you kind of have the most direct line of communication with the businesses that are dealing with this because you're operating the logistics as they trade goods around the world. What are businesses and companies doing about this, if anything, In the same way that maybe there's a question for foreign governments, do we react? Are you finding that companies are reacting to this news?

10:32Ed Elson:Well, it's a bit of a popping of champagne that's happening right now. People are expecting to get refunds. I expect to get refunds. A lot of the trade attorneys and advisory folks are a little bit hesitant to just say something. I don't know.

10:46Peter Harrell:Yeah, you're going to get a refund. It might take you a couple of months, but you're going to get a refund here, Ryan. All right, good. He's on my side.

10:52Ed Elson:Yeah, that's why it's obvious. You read the motion that DOJ filed in the appellate court, and it's just like, we will give refunds if we lose this case. You're like, okay, great. Now you're going to give refunds. Trump says they're going to fight it. It's going to get litigated. Surely that's true. But they got to lose the case. It seems like a slam dunk. How does that work? How does the refund process actually work? Right. So there's a fair amount of uncertainty there. What we do know is under the customs regs, you basically have a maximum of 494 days after a customs entry is filed to do what's called a file a protest.

11:29Ed Elson:And that's the maximum. It could actually be less. So you want to get these things filed sooner than that. And so you're going to have to go back and file protests on all the entries that you did that had IEPA tariffs. And so actually the first IEPA tariffs didn't come out on Liberation Day. They came out on February the 4th of last year with fentanyl tariffs on China, Mexico, Canada. I think February 4th is the 1st. I forget the exact timing of those three different things. But so your clock is kind of like maximum of 494. But honestly, you're pushing it close to the edge. And you don't want to get past that date.

12:05Ed Elson:If you get past that date, it's too late to file a protest. And at that point, you actually have to file a lawsuit to undo the IUPI tariffs. And lawsuits are very expensive. protests are pretty cheap. Flexport and others can just file a protest for you. So that's what we're doing with our customers right now is now that this is now a thing that had been overturned, we've been ruled illegal. We're going through with all of our customer base and filing protests for all of their IEPA entries going back to February 4th of last year. And then we've also created a process on our website at tariffs.flexport.com.

12:41Ed Elson:At the top, Obviously, refund. Currently, it says refund calculator because that's what it said as of Friday. I'm trying to get the team to update and just refund, you know, claim your refund. But that's what that is. We're bringing people in, first of all, calculating the dollar amount of how much is potentially owed. I think likely owed very high probability and then getting you enrolled in a program where we'll go file those protests for you. What we don't know yet is is filing a protest enough. If I file a protest and you acknowledge it as CBP, do you now send me a check or is there some other mechanism?

13:16Ed Elson:And we won't know that until it gets litigated and they lose, I think. And then customs will provide some clarity for what comes next. But for sure, we know you got to go get your protests in if you've got any entries. And if you're only to take one thing away, if you're a business out there, is file your protests. And if you want an easy way to do it, call me.

13:34Ryan Petersen:It sounds like you both strongly agree that refunds are coming.

13:38Peter Harrell:I was just saying, I mean, think about it this way. There's nothing magic about tariffs that make them different from any other tax, right? If President AOC had declared, we're all paying 70 % income taxes now, and the court said, no, there's no 70 % income tax, of course, we'd all be saying, you know, we get our money back, right? It just would be obvious to everybody. and the U.S. government actually, you know, it processes on the different agency, but on the tax, you know, on the income tax, they do 120 million refunds a year, right? It's not like the government doesn't do tax refunds. It's not like the tariffs are some magical thing the government can just keep when they're illegal.

14:16Peter Harrell:They're like any other tax. So I do take the point, and I very much agree with Ryan, the government can make this hard, right? They could try to not issue refunds just as companies are filing protests. They could try to require everybody to come in to sue. Like, they could make this administratively hard. But at the end of the day, whether the government goes the easy way or the hard way, the money is going to be ordered to be turned back over.

14:44Ryan Petersen:Yes.

14:44Ed Elson:And by the way, the government prepared itself. So Flexport has gotten over$700 million of the customs refunds for our customers in the last five years. So Peter's point is like a very normal thing. It's very possible. You know, this is a normal thing. You file a protest, you get your money back. The government has been sending those as paper checks from the Treasury Department for the last five years. And they get lost in the middle all the freaking time and they get cashed by scammers. It's a nightmare. Well, about two months ago, maybe in anticipation of Friday's ruling, they updated their process to say all refunds will now be done electronically through ACH.

15:18Ed Elson:And if you want to refund, it was like auspicious. We're all looking at this going, huh, why are they suddenly getting their house in order and how they're going to process refunds in a more automated fashion? Which does bring up this

15:29Ryan Petersen:question of who's really in charge here. And I think this is why I, at least, I'm sure many observers feel a little bit skeptical about the refund idea, because this is really the policy that Trump has hung his hat on. It was all about tariffs. And so the idea that the Supreme Court is going to come in now and say, actually, you don't have the power. We're striking it down. We're not going to let it happen. This whole thing that you built your entire administration and campaign on is going to be a failure. It's not going to work. We're going to send all that money that you bragged about for a long time, that you were very excited about.

16:05Ryan Petersen:We're just going to send that all back. And so I, as an observer, look at that and I think there is no way that this guy is going to let that happen. I don't know how, but I just get this feeling that he's not going to let it happen.

16:18Ed Elson:I think that's a valid point. And we should clarify some things here. So the Supreme Court struck down the IEPA tariffs, which was one form of tariffs. I did not strike down. There's other two forms that he's done are Section 301 and Section 232. And now the new one, Section 122, are other forms. And those have not been challenged. In fact, those have been challenged in the past and held up. And so reasonable confidence there, but they're different. They don't, the AIPA gave this like sweeping blanket power and that he was really stretching, you know, and the Supreme Court ruled he stretched too far.

16:50Ed Elson:He can't use it the way he used it. But these other ones are more targeted. Section 301, you have to do it on a sector basis and it requires an investigation by the USTR. And there's 12 of those currently underway investigations. So expect more to come out in that regard. 232 is done on national security grounds, which is 232 is where you get your steel and aluminum tariffs. But also this one has to lose in court, I think, Peter. But they also used it to impose tariffs on furniture and saying that that's a national security concern. I see on aluminum you get, you're like, all right, we need to make tanks or something, but furniture feels like - We need our office chairs.

17:27Peter Harrell:You need desk chairs in the Pentagon, right? You know?