Dashboard: Searching for Some Tariff Certainty

Welcome to another 21 Hats dashboard. I'm Lauren Feldman and I'm here with Jean Marks. Hello Jean. >> Hello Lauren. How are you? >> I'm doing great. Great to have you back here. You're good. >> Yeah, I am thrilled to be back actually. So, and thank you for accommodating my travel schedule. It's appreciated. >> Of course. Gan, as you may have heard, there was some big news on Friday when the Supreme Court declared President Trump's reciprocal tariffs uh unconstitutional. What's your uh what's your basic reaction to that? >> Uh well the first reaction I have is that the Supreme Court was absolutely right. Uh they are unconstitutional and all the Supreme Court was doing was was uh basically reaffirming what two lower courts have found uh that the president completely exceeded his authority by um you know implementing these tariffs. So, um I I' I've always um um I've I've always felt Lauren that uh uh presidents should act within the law. Do you know what I mean? And [laughter] >> what a what a concept. >> What a concept. And uh and it's not just Trump. I mean, a lot of his predecess predecessors also um you tried to you lead by executive order and um you know, and then the courts uh would put a stop to that. And uh yeah, thank God um you know, I'm glad we have a court system and I'm glad our you know, all of our presidents are abiding by the court system. Um but they are, you know, Trump is going to um this is not going to end. Uh so this is the one thing that is certain and I've been talking about this for months, Lauren, to uh groups, you know, as I go around and speak, everybody wants to hear about tariffs. My big message is uh I expected this to happen and yet uh the one thing that's certain will be uncertainty for businesses. This is far from over. >> What do you think happens now? >> So well you know Trump has got I mean first of all just going back I mean last June uh Carolyn Lev his you know his press secretary said that the administration can walk and chew gum at the same time when it came to all of the tariff stuff going on. And Scott Bentense, his treasury secretary said back in December, uh that the tariff you if the Supreme Court over, you know, overrules him or or finds him exceeding his authority, uh that that won't affect uh the Trump administration. I am quoting from CNBC. He said the Trump administration will be able to replicate tariffs even if it loses the Supreme Court decision. And again, that was last uh December that he said that. So, um, the administration has a lot of tricks up its sleeve that that they can play. Um, so, for example, uh, there's three big ones. There's the the Smoot Holy Act of 1930, which, um, and again, maybe we can if you want to discuss the pros and cons of each. >> Yeah. Well, we could go through them quickly, but, you know, that it's it's interesting. You mentioned the Smooth Holy Act, and of course, you're right. Uh, we all learned about it because it was considered a disaster. >> Yeah. >> Tell us uh, how that might come into play now. >> Yeah. I mean it it was a disaster uh when it was last implemented but it is it is actual law. So I like that because you know it is you know it allows the US to impose up to 50% tariffs on imports from countries that discriminate against US goods. So that is all the you know all the the stuff that the president would need. Um you know it requires an investigation. There is a time limit but again you know it does leave the entire decision up to the president. But, you know, the problem does he it requires congressional approval. Yes. Too, doesn't it? >> Yes, that's exactly what I was getting at. Yeah. The the the issue is is that a president just can't just do this on their own like Trump has been behaving. Um he would need compre congressional approval to enact the Smoot Holly Act. And um as we all know, even though he has a slim majority in both the House and the Senate, there is, you know, there's a not insignificant number of Republicans, people in his own party that are not thrilled with tariffs and that, you know, and I think he knows that like going down this road to get congressional approval, um would most likely end up in failure. um you know and and by the way I mean the way the midterms are looking I mean you know it's likely I think he's going to you know lose you know you know at least the House if not the Senate in um the midterms and if this happens then forget about ever enacting the Smooth Holy Act. So I think it's it's an option for him if he wants to go down that road. I wish he would because it's law you know and like that would be you know if Congress approves it then I'm all you know supportive of that. That's, you know, that that's why we elected our officials. >> Wait, you would be in favor of the tariffs if they're done legally? >> No, I'm saying I would be in favor of um I'm not saying I'm in favor of tariffs, per se. That's another argument to have or another debate to have, but I would be in favor of um that that methodology of moving forward with tariffs if he >> doing it legally. >> Yes. Doing it through Congress. Yes. Doing it legally. So the Smooth Holly is one option, but as you well know, he he's already said he's going to choose a different option and and that's I believe section 122. >> Yes, there's section 122 of the Trade Act of 1974 and there was section 232 of the Trade Expansion Act of 1962. Um, one of those act, the first one, the 1974 one, gives him the ability to impose up to a 15% tariff on countries as he chooses. Uh that's exactly what he did last week. As soon as >> or he said he's going to do I don't know that the action has actually been put into place. Do you know? >> True, but it looks pretty likely that that is going to happen. He's going to raise the global tariff that he has already in in effect from 10% to 15%. However, there is a 150day limit to this tariff. Um, so unless Congress again approves an extension, which you know is as you know as I mentioned before is far from a sure >> 150 days would put us right before those midterms you were talking about. It would be a very difficult vote to ask his u party members to take. >> It would but and yet at the same again I mean listen I I actually support a Democratic um system of government. So, if it puts it in front of the midterms and the Democrats make this a uh, you know, a main issue of their platform, which I would expect they would, um, and then let the voters decide, um, I don't know. I mean, I I I've always said to people that were upset when Trump got elected to say, "You got midterms coming up in two years. Um, you know, you you you'll have your chance to turn things around." And that's a perfect example of of one of the things that can happen. Um, so yeah, he's limited to 150 days. uh but he's you know he might still play that card and you know we'll you know business are gonna have to deal with this over the next 150 days. Then there's the section 232 of the trade expansion act of 1962. So this is a third choice right the first was smooth holy the second was the 1974 150day limitation. This one the 1962 trade expansion act does allow him to impose tariffs on selected sectors and industries. This is exactly what the Biden administration did in 2024. Uh they imposed tariffs on steel and aluminum and semiconductors and electric vehicles and critical minerals. They were all pointed towards China of course, but it wasn't you know and that's how the PR was, but it was really he was he was using that that act to do that which gave him the ability to do it. Um those tariffs can go on for as long as the president wants. However, investigations are required along with public comment. So, I can see the Trump administration getting, you know, to all sorts of tricks uh with their investigations and quote unquote public comment and then just implementing tariffs on key products, sectors, industries that obviously are connected to certain countries. And that gives him a lot of flexibility to do what he's got to do. he'll he'll get sued and you know people say they didn't do enough investigation or they didn't take enough public comment or whatever. Um and then as we know from this president he will you know he will sue back and they'll fight it out in the courts and it'll get extended and who knows when that will ever be >> and the uncertainty will continue. >> Correct. And that is that gets back to what we said at the beginning of this conversation. If you're a business and you're affected by the tariffs, don't think for a second that like, oh, I'm I'm all good to go because of the Supreme Court ruling, um, you know, he's got he's got tricks up his sleeve and the uncertainty is going to continue. >> I think with the 232 thing, the the couple things that are worth pointing out there is, uh, one, you can't do it globally. You have to go country by country. >> Yes. >> And also, you have to have specific, uh, complaints about those countries. And I I think the the the categories that I saw were national security or unfair trade practices. You have to be able to establish a case on those grounds. >> Yeah. And the Trump administration will make those cases and then again people you know there certainly will be people particularly in the industries affected that will you know that will oppose and then what you think he's going to roll over you know I mean they'll go to court and they'll fight and appeal and fight and appeal and blah blah blah. >> All right. So, another big area of uncertainty and one that a lot of small businesses are really concerned about is what are the prospects of getting a refund of the money that was taken unconstitutionally. What do you think, Jean? >> Forget about it. [laughter] >> I I mean that particularly for a small business um and let me let me tell you for starters the refund I'm gonna give you a few things that that you need to people we all need to understand. Um, the refunds actually come from the the importer exporter of record. Like, you know, if you're bringing products into this country, you're dealing with a brokerage firm or an import export firm, and they're the ones that are of record. They receive the goods in, they're the ones that pay the tariffs, and then they turn back to their, you know, to their customers to to, you know, pay them. >> Well, wait a second. If somebody is importing goods from China or wherever, a small a retailer, >> Yeah. They're laying out money for those tariffs. >> They're Yeah. It goes through a middleman. Okay. Because that's that's how it works. And so the middleman is the one that's actually the the one of record, the importer export of record. That's how the the tariffs are recorded. And then the middleman as part of their brokerage agreement with the companies that they're representing then get reimbursed from those companies for these tariffs. You follow? >> Got it. >> So it would have to be the middleman. And by the way, this is, you know, I mean, this is it would have to be the middleman that would have to go and and and get that money back. Like the company can't do it. It's because they're not the one of record. So now you're asking some of these brokerage firms, many of them are smaller and whatever. You got to rely on them to to to go through this process. I'm not saying that they're not able to, but they're just not structured to do this or have the resource to do it. there isn't even a process in place for them to follow. So, you're really kind of going to have to lean pretty heavily on these companies to do that. And that's one that's one thing. Okay. Um the second part of it is that um the um even the the Supreme Court like Justice Kavanaaugh and his descent said this was going to be a mess. The Treasury Secretary Scott Besson said, "Hey, uh we're not coming up with a process. That's for the the lower court to decide because we're the you know, that's where it all started." So the administration are basically just wiping their hands at this and turning it back to the lower court to figure it out. God knows if they're even able to do this. Nothing has been thought through. So that will be the issue. And then we have read that there are some lawyers of you know larger corporations have been filing um claims to get refunds and you know instituting lawsuits. I mean they're going to be the ones with their hands out first before any crumbs get dripped down to smaller businesses. You know what I mean? Um, and that's going to take a while if it even happens at all. So, I just I'm not saying it couldn't happen, Lauren, but it just it just seems like it's it's going to be a long hard hill to climb for a small business to get that money back. That's my opinion. >> Does it seem a little callous for the administration just to wipe its hands? I mean, it's it's been determined that they took the money illegally from uh a lot of small businesses. Everybody's in favor of small businesses. Why not take some initiative to try to make them whole? >> Yeah. I mean, I think it does sound callous, but at the same time, I think that their position is um regardless of what the Supreme Court did, we're going to do other things to collect tariffs. So, it's >> and that's going forward. Whatever they do going forward, [clears throat] they've all, [laughter] you know, >> will they make the case? I'm just I'm, you know, putting words into their mouth. you have to ask them, but would they make the case of saying, well, you know, these new tariffs, you know, under the, you know, 1974 act or the 62 act, you know, whatever, um, would just replace the tariffs that have already been charged in the past. So, it's, you know, six of one, half dozen of the other. So, no, you're not going to get any money back because of that. Do you know what I mean? I mean right now um that you know the the tariff situation is such that for most countries even you know EC now India uh you know uh Mexico Canada the tariffs are in that 10 to 15% range you know China it's higher it's like 30%. you know, so you know, there is that sort of case that they could make saying like, well, it's in that range anyway and these tariffs are under the 74 act that we're using right now, so therefore you can't come back and and and get them back. I don't know, Lauren. You know what I mean? Like it's the there's a lot of arguments that they've got and, you know, they're going to be making them. So, it is, you know, it's it's their it's their position. We should probably point out that these reciprocal tariffs that have been declared illegal are not the only tariffs that he's used. Uh he's also uh put tariffs on u aluminum and steel manufacturing inputs that are not affected by this in any way. Um, so the the domestic manufacturers that have been paying the tariffs for that, they have no prospect whatsoever of a refund and their situation continues as as it was before the ruling. >> Yeah, you're right. You're absolutely right. Yeah. And he continued on from the Biden administration. You know, they were they were the ones that implemented a lot of those tariffs and Trump has has extended some of those or uh increased them as well. So yeah, you're you're you're absolutely right. That's why it is. And again, I getting back to the callous question though because it is it's rough. Um I you know we we talked about this you know before and I've talked about the maps that I show when I speak about how all the all these states in in America have more GDP than many countries out there and all of that you know and you know I think if you would ask the Trump administration and please for God's sake not Trump himself but if you would ask the Trump administration their you know their position is this may seem callous but in the long term it's the best thing for small businesses because we're going to bring more manufacturing back to the US and more investment and more, you know, alternative suppliers that, you know, American companies can be using. I'm just I'm not saying I agree or disagree, Lauren. You know, just I think that's how they would probably respond to that. >> Well, [clears throat] I'm sure you're right. Um the the irony >> I don't I didn't say I don't know if I'm right about that either. >> Well, you're right that that's what they would say. And I think though the you know, just recently there's been data that's come out that shows that the trade deficit has expanded. not been reduced uh in the past year which means that the tariffs haven't worked the way they were supposed to yet and and with a lot of uncertainty now. >> Yeah, that would be their argument is that the tariffs really didn't kick in until the second half of the year. Sorry, it's not enough time and you know and then of course not only that but you know you failed to mention I mean I'm sure you have you know in the past that you know there have been other studies that are showing that you know this is being you know being borne by the US consumer and small businesses and businesses these price increases you know so >> absolutely absolutely that that's come out that's been reinforced in in data that's come out studies that have come out recently that I I think the figure was like 90% of it um has been paid by small businesses and consumers the administration is yeah the administration will will come back and say okay that's short term and we believe this is what's best for America long term >> actually they said it was a lie they said it was a faulty study [laughter] >> that comes as no surprise either but the takeaway is is that uh you know they are you know they're doing this because they they feel it's what's right for America for the long term. I'm not saying it's right or wrong. I'm just saying that is right that's their position. One other thing about refunds I wanted to ask you as as I know you know I don't know how closely you've looked at this. Um there are outfits that have been selling kind of a form of insurance if uh you know even before the decision came down if you wanted to pay them uh I mean they they would pay you a certain amount of money to buy your quote unquote refund receivables uh if they ever come. uh you know obviously it was not uh a dollar for a dollar worth of refunds uh but some some businesses did that I think mostly larger businesses. Is that something that you've looked at? Do you know if if that's something that should be considered at this point? >> I got to tell you that's it's a really good issue and now you know you get my wheels cranking like because then it's sort of a form of insurance you just said. So then I'm starting to think like is there tariff insurance out there for small businesses? I mean, I don't know the answer to this, and that's something I'm making a note of right now, Lauren, and I thank you. I I I am going to look into that. Oh, I hope you do. >> I I think insurance companies would be would be mentally ill to get into this, you know. >> Well, you know, one company that I know has done this is Caner Fitzgerald. Have you seen that? That it's the uh the company that's run by uh Howard Lutnik, the uh Treasury Secretary. His sons are now in charge of it, >> right? Yep. Lutnick is the commerce secretary. >> I'm sorry. Thank you. >> Yep. Yep. Uh, Bend. Um, is this treasure? I know they're selling it. I I think there are others. Um, >> uh, yeah, I'm I'm going to, um, yeah, I'm I'm going to I'm going to look into it. I like this a lot. I mean, it's an interesting I'm more interested. I mean, I'm looking on the as you and I were speaking, I'm actually like googling this um because it is a big company kind of thing. You're right. that they're that they're representing and I write about small businesses but then I you know I it gets back to does small companies have and you know have options here. Lauren, do you have my promise as part of this conversation and for all the millions of people that are listening to us right now? You have my promise as well that I'm going to investigate this and see if there are options for small businesses to get some form of tariff insurance. The only the only you know I've been giving so many different options for businesses over the past year. You know, we've talked about bonded warehouses and free trade zones and, you know, make on shoring great again portal and world trade center and all that. This is another interesting thought and I'm going to look into it. I like it. >> So any thought I mean the last time you were on I think you were saying that you felt as if the um the tariff issue had kind of calmed down a little bit in part because it kind of seemed to be set other than the fact that this decision was looming. um you know the the tariffs weren't weren't going up and down every other day the way they did for a little while. Uh businesses could maybe think they could start to plan a little bit. That's all out the window now. Um [clears throat] how do you think h [laughter] how do businesses look at this going forward? I mean for for some it's a really significant expense that's there or not there. Yeah, it really does obviously depend on the business. You know, um the the you know, the there's two things. I mean, I I think that from a from a media perspective, it's not going to come down. I think you're going to continue to see all sorts of coverage about this, you know, um because, you know, it's it's a great story and he's going back and forth and all that kind of stuff. Okay. But I just I just want to be clear like right now as we stand um the the the the tariff on the EC even before this global increase uh to 15% is 15%. And tariffs in Japan are 15%. And the tariffs on Mexico and Canada they are 25% but really if you're not USMCA compliant you know the trade agreement. So for the most part most of those goods um are are skirting tariffs and that's why Mexico has now become our world's largest trading partner. The tariff on India another major trading partner of the US is now down to 15%. China is at 30%. And I get that but even as China is at 30%. Many of the tariffs that you mentioned there's industry specific you know tariffs you on aluminum semiconductors all that kind of stuff. Um they there are anywhere from 25 to you know 25% um and you know even higher. My my point is is that I don't think that in reality that's going to change that much. I think that Trump might, you know, invoke uh and move forward with say the 1962 act for tariffs on sectors and industries or like he's increased the tariff or is proposed to increase the tariff to 15% um you know for the global tariff, but that's not those rates that he's settling in on. They don't seem to be much you know different than what's already in place right now. So to answer your question, I do think there's going to be all sorts of news and all sorts of things going back and forth because it's a great story. But I think if you're running a business that 15% tariff that seems to be like this across the board agreed on tariff with most countries with the exception of China, um that seems to be like where is this going to be? So when you know when it comes to certainty I think that you can you you can make your plans assuming a 15% tariff rate. I don't foresee that being significantly more or less um as all these battles are taking you know taking place in 2026. >> I think that makes sense. Um you know obviously the 15% you're referring to that he is talking about imposing um has a 150day expiration date. He has plans to try to extend it beyond that. So if you plan on the 15% you're probably safe and if it goes away you get lucky. >> Yeah. And even though I I wouldn't bet on it going away because again you know that 1962 act he can continue to do something like that that 15% rate on certain sectors and industries you country specific like you mentioned. Um and I you know he'll you know I think he'll play around with that but you know he's a lot of the countries are are um they've negotiated this stuff already with the Trump administration. The status of those deals is kind of up in the air though, right? >> It is. I I agree. And you know, but at the same time, I don't I just I I don't get the sense that there's a lot of that's going to the rates themselves are going to change a lot. Now, that doesn't mean he's not going to bluster and yell and scream and you know, you know, you threaten more and this and that. That's all that's going to happen, but I just think if you're running a business, I think it's a fairly safe bet to assume a 15% tariff over the next year or two. And like every business owner tells me, Lauren, when I speak to them, when I interview them, my clients, they're like, "You know what? I I don't like the terrorists, but I just want I want to know what they are so I can run my business." Do you know what I mean? And I think that that I think that that will be the case. >> Well, Jean, we know one thing you're planning to work on, and that's to look at the uh the option of selling your uh refund receivables. Anything else we should look for? [laughter] >> Are there any other business stories out there? >> [laughter] >> You know, um I am going to write about I think uh for this week for the Washington Times, I'm writing on a on a piece about um just like local legislation uh good and bad that's happening around the country for businesses. You know, so much the the the federal government has stepped away um you know, from a lot of regulations as it is, but a lot of states have have picked that up. Some for the good for businesses and some, you know, not so good for businesses. and I was um I've been researching to do sort of a recap of that. So that's what I'm working on. >> Sounds uh interesting. Something else that we might talk about in the future. >> Yeah. >> Gene Marks is a CPA who writes weekly [music] on small business for the Guardian, The Hill, the Philadelphia Enquire, the Washington Times, the Chicago Daily Herald, Forbes, and Entrepreneur. You can hear him on ABC [music] radio's Eye on the World with John Bachelor. Gene also hosts a podcast with Paychecks [music] Corporation. Gan, thanks for taking the time. >> Lauren, I love talking with you. Thank you. Uh we'll talk again soon. >> Our pleasure. Take care everybody. Have a good week.