Richard Stern - Should businesses get billions back from illegal tariffs?

The federal government is now refunding billions of dollars in tariffs after a Supreme Court ruling declared them unlawful. Could the decision reshape trade policy and cost taxpayers far more than expected?

Richard Stern is Vice President of the Plymouth Institute for Free Enterprise at Advancing American Freedom. He joins the show to discuss the Supreme Court’s tariff ruling, the growing wave of refunds being paid to importers, and what the decision could mean for trade policy, government authority, and the American economy.

Transcript

SPEAKER_00 0:09

Welcome back to the programming. It's a pleasure to be with you, and there is a real quandary going on right now because the tariffs that were imposed by the Trump administration, and I agreed with his reasons for doing it at the time, the courts have now decided, well, the some of those were illegal and they must be paid back. So the Federal Government is cutting checks to the tune of $17 billion in counting. It may force a total of $166 billion to actually be refunded. And are the businesses going to enjoy a windfall because of that? Richard Stern currently serves as Vice President of the Plymouth Institute for Free Enterprise and Advancing American Freedom. Richard, welcome to the program. How are you?

SPEAKER_01 0:52

Always a pleasure to be here. Thank you.

SPEAKER_00 0:54

So I want to know, and this is where it gets complicated. If goods came into the United States, the the company that brought them in would pay the tariff. And then if the tariff is judged to be illegal, the company gets a refund of the tariff money they paid. But in the meantime, if they went ahead and passed on the goods to American consumers with some or all of the tariff included in it, then the check they're getting from the federal government is a windfall, isn't it? And is there any clean way to sort this out?

SPEAKER_01 1:27

Well, to be fair, not only can that turn into a windfall, but it's actually even more complicated than that tragically. A lot of the comp yeah exactly. A lot of the companies that bring in the goods aren't even the company that sells them. So think of Walmart or Costco. A lot of times the company that they will contract is a customs broker who just brings the products across the border. And so sometimes you're looking at a company that paid the tariffs that has the right to get a refund, not even being the Walmart or the Costco, but being a company you've never heard of that they contracted to get the goods. And more than that, that company will then sell the right to a refund, and they were doing this for pennies on the dollar last year, to a hedge fund who buys it in making the bet that maybe they can get a refund at some point. And so it's an enormously complicated mess. This is part of the reason why, frankly, we should never have imposed these tariffs to begin with. But, you know, this is one of these things we we actually have a new report out uh at my uh at my think tank talking through all these issues and legislative fixes we would propose the Congress to actually address them.

SPEAKER_00 2:38

But this could actually happen anytime that the government imposes tariffs. And it's not as though Donald Trump invented tariffs. He certainly used them a lot more than previous presidents, but it could happen anytime that there's a decision that tariffs must be refunded, couldn't it?

SPEAKER_01 2:54

It could, but to be honest with you, I'm familiar with no tariff case that has happened that was not easy to see on the front end. The tariff authorities are pretty clean, they're pretty pretty clear-cut. That being said, the AIPA tariffs, AIPA doesn't allow a president to conduct tariffs. We have a century, not quite a century, but 80 years of case law backing up that AIPA was never intended to be used for tariffs. The president invented this authority and then hoped that he could frankly pressure the courts into agreeing with it. So, you know, it's one of these where this is a mess. It's a tremendous tragedy for consumers who felt the cost, for companies who had their businesses shuttered who dealt with this. But everyone knew this was illegal on the front end. This was really the attempt of the president and a few politicians around him to try to railroad the courts and frankly railroad the American public to the tune of nearly $200 billion.

SPEAKER_00 3:50

Okay, so why do you think that Trump decided to go that direction? Because there were other, were there not other tariffs that he imposed that were judged to be legal? And he and he could have stuck with those, weren't that, didn't he? Or couldn't he have?

SPEAKER_01 4:03

So the exactly so the tariff authorities that exist are for narrow, specific, you know, dealing with issues that come up tariffs, national security crises, or where there is a deeply unfair trade practice that some you know company or country is committing, but not for worldwide tariffs, not for tariffs that are higher on our trusted allies than they are on China, right? Not for tariffs on islands that are inhabited solely by penguins. So to implement tariffs like that, there is no authority. Congress never gave the president the authority, any president the authority to just sweepingly oppose tariffs for no reason. So that's why he felt the need to invent this authority as opposed to using the narrow ones that are there. And so you're right, he has imposed some tariffs onto the other ones, but those not always, but mostly fit the bill of the narrow confines of the existing authorities.

SPEAKER_00 4:59

Okay, but but to some extent, as a business person, you'd think that he would be somewhat conservative about this. And he'd say, let's go with the ones we know we can do. I mean, uh, you know, if you compared presidents say between Biden and Trump, I think Biden went outside the law a lot more than Trump ever did. But this one's one where it sounds like you say if he was properly advised, he would have been told, this stuff is definitely illegal. You're not going to be able to bluff this one past the courts. Do you have an insight, Richard, as to why he decided to go said, do it anyway, damn the torpedoes?

SPEAKER_01 5:33

So to your point, I agree with you entirely. Look, Biden and really most American presidents since World War II have abused power. They've expanded tremendously the reach of the presidency, they have degraded the power of the legislature of Congress that we all vote for, that represents each of us in our states and our local communities. I think that's a tragedy of a bipartisan making, absolutely for sure. I think he was advised by people like Peter Navarro, who is ideologically blinded, who doesn't really understand the law. But I think he and people around him also said, you know, until the court rules on it, who knows? Maybe this is yet another place where we can expand presidential power and take advantage of it and use it the way we want to use it. And so I think that's part of the advice. But you know, I think there's something also to keep in mind here, which is he is a great businessman. But, you know, part of what business is about is taking risks. True. But it's taking risks with your money as opposed to taking risks with taxpayer money.

SPEAKER_00 6:33

Yeah, and that's true. And and the other problem with this is even at the front end of this, a lot of us were anticipating, well, what happens? And I hadn't thought of that middleman broker that you mentioned. But imagine this goods come in, a widget. It comes in, the importer that is then going to sell it off to Walmart or Kmart or whoever, uh, they bring it in, pay the tariff on it. They then pass it on with some or all of the tariff cost included in it in the retail they make to the retailer. The retailer pays the full price, pass it on to their consumer at full price. All of those players paid full price. The re the wholesaler, the middle got middleman guy, might have paid none of the tariff, but now the middleman guy is going to get a check unless he already sold it to the uh, you know, to the uh the the uh what the polymarket folks.

SPEAKER_01 7:23

And this is exactly the problem. But you know, I will tell you this. We it's it's opened up the hood so that we can all take a look at this one really bad setup where there's going to be windfalls, there's going to be people that lose out. But truth be told, this is what happens whenever the government gets involved. You know, a lot of people don't realize this, but uh welfare tax credits, for example, an enormous percentage of those tax credits don't go to welfare beneficiaries, they go to tax preparers who help them get the credits. And, you know, truth be told, if you go down the line, you know, money that's set aside in Medicaid for healthcare goes to Planned Parenthood to perform abortions and murder babies. Every time the government gets involved, there's something like this that happens where there are middlemen who make a cut, there's people who are intended to benefit who lose out on it. But, you know, I will tell you though, this is again to me, this is yet another reason why you want government to be as little involved in our lives and the economy as possible.

SPEAKER_00 8:24

You know what, Richard? From your lips to God's ears. I mean, I wish, I wish we could get the government out of so much of my life. And the biggest complaint, Richard, that I get about the show, all you talk about is politics. I say, fine, tell me anything in American life right now that is not political. Food, energy, automobiles, anything you want to name, it's all political. That's Richard Stern from Advancing American Freedom. Richard, thanks so much.