Trump forced to refund billions in tariffs – The Latest

0:00Chris Michael:This is The Guardian.

0:30Chris Michael:at doing what he wants, but the Supreme Court told him he actually can't. From The Guardians today in Focus, this is The Latest with me, Lucy Half.

0:41So Donald Trump has often said that his favourite word, the most beautiful word in the dictionary as far as he is concerned, is tariff. I wonder if that's something that he is reflecting on somewhat this week, given that the US has paid$81 billion in tariff refunds in the last year. Chris Michael, you are our international editor for Guardian US. People will remember April 2025, when Trump held up that laminated board of tariffs. What's changed since then that means these refunds have had to be paid out?

1:18Chris Michael:Yeah, one wonders if refund is his second favorite word. I imagine not. Yeah, I think it's safe to say probably not. What's changed is an incredible Supreme Court ruling in February of this year, which said that Trump's tariffs were illegal. Trump, you may recall, declared an emergency, a national emergency. He said our trade deficits with other countries, China, but many other places are ludicrously high. And instead of trying to address the root causes of that, he just said, we're just going to slap tariffs on other countries to address this national emergency. He's done it with other things as well.

1:59Chris Michael:He loves declaring emergencies in order to kind of try to get powers that he really doesn't have. But the Supreme Court said, no, you don't have those powers. You aren't allowed to just unilaterally impose taxes, which is what they said it was. You know, the president doesn't have the authority to impose taxes. Only Congress does. A word that Donald Trump does not like, we should say. Right, absolutely. And so, yeah, it was a huge blow to Trump. He said, I'm going to fight back. I'm going to, you know, we'll get the tariffs in through other means. And he has instituted some other ones. But by and large, the ruling stood and Trump and the U.S.

2:41Chris Michael:government have had to repay these sort of massive tariffs that they collected. And yeah, that's what they've been doing. Yeah, so on that list, that laminated list was a list of nations. So, you know, China had in excess of 60 % tariffs, Vietnam had an extraordinary 90%. But there were also two uninhabited islands inhabited mainly by penguins, who also had some pretty harsh tariffs imposed on them, which feels unfair considering their probably negligible contribution to the global economy. But it's not actually nations who are suing because it's a series of lawsuits, right? It's companies who've been impacted by these tariffs.

3:25Who are they?

3:26Chris Michael:You know, any company really that imports. Famously, Trump was sort of portraying the tariffs as punishing other countries. But it's U.S. companies that have to pay them. And it's U.S. consumers that end up eating the cost of that. So that's exactly who have been collecting them. And, you know, so it's big companies as well as individuals. You know, if you had to cross a border and, you know, you had to pay customs duty, you know, for one of these places where there was a tariff, you are eligible in theory for a refund. A lot of people obviously won't be claiming those small amounts back. And some companies have been set up on Wall Street to sort of collect the tariffs, you know, on behalf of large groups, a bit like a class action suit.

4:10Chris Michael:And there's another big group of people that will be benefiting, which is the people who bought into a sort of secondary market for tariff refunds before the Supreme Court decision. And they were buying up these tariff refunds on, you know, like sort of 10 cents on the dollar, hoping to make a buck in the future. I mean, you touched on it in your first answer, but what was the sort of point of the tariffs in the first instance? Because it was both about a kind of geopolitical sign of strength, but it was also about this trade deficit that Trump was very concerned about. But I think we can safely say they have been ineffective if that was their tool.

4:48And that's largely because it feels like he didn't think them through in terms of their impact on American companies. Yeah.

4:55Chris Michael:I mean, the argument that he gave was he wanted to bring manufacturing back to the US. He wanted to address the trade deficit. There's a rational argument for that, whether or not you think tariffs is the right way of doing it. Who knows? US manufacturing, however, did not recover. It is in a profound slump and continues to be. So in that sense, it really didn't work at all. But it was central to Trump's economic message, this America first thing, you know, who cares about the rest of the world? We just want to, you know, make T-shirts back in the US. So that, you know, that was kind of one element of it.

5:27Chris Michael:But then the other big part of it, as you say, was the geopolitics of it. And the reason he thinks tariffs is such a beautiful word is that it was a kind of cudgel that he could use to browbeat other countries into doing what he wants. It started with the country of Colombia right after he got elected. You know, he threatened tariffs on them. They immediately backed down. And he decided, oh, you know, this is great. I can use it on everybody all around the world, much in the same way as, you know, when he went into Venezuela and took out the leader of the country. And now they sort of run Venezuela as a vassal state.

5:59Chris Michael:He thought, oh, I can apply that lesson elsewhere. And he tried to do that in Iran and it didn't work. But he has this kind of, yeah, he sort of thinks, oh, great, like, you know, this one thing works and now I can just bully the rest of the world with it. But the Supreme Court told him he actually can't. Yeah. So there is this still 10 percent blanket tariff, right? Why is that still in place? And is that something that the Supreme Court can look at? That's a, it seems to be a sort of legal tariff. It's under Section 122 of the 1974 Trade Act. Which you must have read in full. I have read it in full.

6:39Chris Michael:I absolutely haven't. Trump had to fall back on that. It does set a maximum tariff of 10%. And it's only for six months. So it actually expires in a week and a half. Now, the administration say that they're going to try to extend it. They're accusing other countries of not enforcing labor laws. You know, I don't want to say that's completely made up, but certainly it's a, you know, a useful fiction for them potentially. And so they will try to get it extended. But, you know, 10 % is nowhere near as damaging as you noted some, you know, 90 % tariffs in other places. And Trump continues to sort of threaten these other tariffs.

7:18Chris Michael:Last week he was saying he was going to institute 100 % tariffs on Europe. I mean, it's ludicrous. He doesn't have that power. Everyone knows it. Everyone in the EU just went, yeah, bring it on, buddy. And so he does look sort of weak at the moment with this. Well, particularly in light of the Supreme Court ruling in February of this year, and particularly given the formation of the Supreme Court at the moment, which is padded out with Trump aligned people. So it's very significant. So we know that the economy is absolutely up there in terms of the top issues for American voters. We have the very crucial November midterms.

8:00We've had the economic hit from the tariffs, which have hit American consumers hard. And, you know, there are reports that people feel that they are directly responsible for an increase in the cost of living. We have also this year had the impact of the Iran war, the impact that that's had on consumers. So how do we know that Americans are feeling about that? And as someone that's right across what's being reported in America, I wonder how this is being reported in sort of traditionally Trump-aligned publications.

8:32Chris Michael:Well, the interesting thing about the impact on energy prices and on costs is that it is a bipartisan issue. Both Republicans and Democrats, about two-thirds of both groups, feel that Trump's tariffs have cost them more money quite directly. And, you know, the price at the pump affects everybody and is a kind of in that sense a sort of a wedge issue. So, you know, it is a huge problem for Trump. Also, just last week, the Fed said that a lot of companies have yet to price in some of the worst impacts of the tariffs. And so their prices are going to continue to rise. So this is bad news for American consumers.

9:18Chris Michael:And it's bad news for Trump politically, because, of course, people don't, you know, famously high prices and inflation did for Joe Biden. And, you know, Trump is now sort of facing the same thing. So in a sense, you know, you could kind of say that the Supreme Court's ruling back in February has protected Trump a little bit by keeping prices from rising so crazily. and in a sense they've sort of they've protected him from his own worst impulses Yeah, gosh what a thought Chris thank you so much. Thank you That's it for today, my huge thanks again to Chris Michael, the international editor for Guardian US, you can keep up with all our reporting on this story over at theguardian.com and I really recommend today's episode of our sister podcast Science Weekly which is asking the question could hidden fungal networks be key to the Earth's survival?

10:14Thanks for listening to this episode of The Latest. Today in Focus will be back in your feed as usual tomorrow morning. The Latest will be back tomorrow night. This episode was presented by me, Lucy Hoff. It was produced by Angus Neill and Sam Gruet. The executive producer was Zoe Hitch.

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10:50Chris Michael:This is The Guardian.