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Short Seller Convicted & Tariff Refunds · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
0:08
Speaker 1: Famed short seller Andrew Left faces the possibility of decades
0:13
Speaker 1: behind bars after a jury found him guilty of using
0:17
Speaker 1: disingenuous social media posts to manipulate stocks. It's a landmark
0:23
Speaker 1: case on market manipulation that threatens to further chill a
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Speaker 1: broader trading strategy loathed by corporate executives. After two days
0:32
Speaker 1: of deliberations, the jury convicted the fifty five year old
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Speaker 1: Left of thirteen of seventeen counts. He'll be sentenced on
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Speaker 1: August thirty first, but as already indicated, he intends to
0:44
Speaker 1: appeal the verdict. Joining me is Bloomberg Legal reporter Eric Larson,
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Speaker 1: who's covered the trial. Eric tell us about Andrew Left,
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Speaker 1: who is he and how did he end up on trial?
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Speaker 2: So, Andrew Left is one of the most prominent short
0:59
Speaker 2: sellers on Wall Street, and he's been closely watched by
1:03
Speaker 2: his followers and supporters for a long time. He was
1:05
Speaker 2: a big, you know guy on Twitter back in the
1:07
Speaker 2: day and had lots of followers who watched his comments
1:10
Speaker 2: about stocks and companies, and you know, like other activist
1:14
Speaker 2: short sellers, he put out research reports on companies that
1:17
Speaker 2: he was tracking. He was known for that, he had
1:19
Speaker 2: you know, some correct commentary and views that he came
1:22
Speaker 2: out with that lent him some credibility and again built
1:25
Speaker 2: up that big Twitter following. And of course short sellers,
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Speaker 2: you know, make money betting against companies, so you know
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Speaker 2: a lot of executives maybe don't like them because of
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Speaker 2: what they do, but so a lot of different activists
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Speaker 2: short sellers engaged in this kind of practice, especially back
1:42
Speaker 2: in the years relevant here, which was twenty eighteen to
1:44
Speaker 2: twenty twenty three. But the Justice Department started investigating the
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Speaker 2: whole industry and ended up targeting mister Left in particular
1:54
Speaker 2: over the specific way that he did his social media
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Speaker 2: commentary and trading in which Boiling it Down basically said
2:02
Speaker 2: that he was misleading investors, particularly retail investors, about his
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Speaker 2: trading intentions and specifically just trying to manipulate the stocks
2:11
Speaker 2: so that he could do some real quick trades and
2:14
Speaker 2: make some money. And according to the government, and mister
2:17
Speaker 2: Left didn't deny it. Over that period of time on
2:19
Speaker 2: the stocks an issue in the case, he made over
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Speaker 2: twenty million dollars in trading profits.
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Speaker 1: What was the prosecution's case give us sort of the
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Speaker 1: focus of the prosecution their most critical evidence.
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Speaker 2: So the case really did hinge on his tweets at
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Speaker 2: the time, that's what they were on the platform then
2:38
Speaker 2: known as Twitter, and the records of his trading activity,
2:43
Speaker 2: lots of detailed records and charts about those trades were
2:45
Speaker 2: shown to the jury, and of course his private communications
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Speaker 2: that the government sees as part of their investigation, his
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Speaker 2: telegram messages, texts, emails, that sort of thing. And what
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Speaker 2: they did was use all of this evidence to paint
2:58
Speaker 2: a picture of mister Left planning in advance, specifically to
3:03
Speaker 2: manipulate the market with a tweet or a research report
3:06
Speaker 2: or both at the same time, and then already pre
3:09
Speaker 2: arranging trades in advance so that he could quickly make
3:12
Speaker 2: trades close out his short or long positions. His long
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Speaker 2: bets were also part of this case, and it showed
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Speaker 2: that he didn't always believe what he was saying, that
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Speaker 2: his primary goal was to get his followers to help
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Speaker 2: move the market so that he could make those trades,
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Speaker 2: which according to the government, were often complete opposite of
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Speaker 2: what he was basically saying. He was saying he was
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Speaker 2: short on a company, but then he would quickly close
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Speaker 2: out his short position after saying that when others started
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Speaker 2: doing the same, so he made his profit. And oftentimes
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Speaker 2: these target prices, he would say, I'm betting this company
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Speaker 2: will go to this price, way down to this price,
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Speaker 2: implying that he was going to hold his short position
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Speaker 2: until that time, but then of course closed it out
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Speaker 2: much sooner and again made that quick profit that I
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Speaker 2: mentioned earlier.
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Speaker 1: So now Left took the rare step of taking the stand,
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Speaker 1: testifying in his own behalf, and trial experts say that
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Speaker 1: when a defendant does that, the whole trial sort of
4:10
Speaker 1: becomes about his or her credibility. So how did he
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Speaker 1: do on the stand.
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Speaker 2: Well, it was a bit rough, I mean, as you
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Speaker 2: can imagine. The reason that criminal defendants don't often take
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Speaker 2: that risk is because after you get done with your
4:24
Speaker 2: really friendly questioning by your defense lawyer allowing you to
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Speaker 2: you know, put whatever we could say, spin on the
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Speaker 2: evidence in your own words, justify your actions, you're then
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Speaker 2: put up on cross examination and it can be pretty brutal.
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Speaker 2: I mean, in this case, a prosecutor, you know, went
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Speaker 2: line by line sort of picking apart a lot of
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Speaker 2: what mister Left had said and presenting evidence at that
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Speaker 2: time to show that maybe what he was saying wasn't
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Speaker 2: exactly true, you know, confronting him with these communications that
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Speaker 2: undermined a lot of what he was saying, and he
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Speaker 2: came off, you know, not to be surprised, as pretty defensive.
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Speaker 2: At times. The judge had to interrupt him repeatedly to
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Speaker 2: tell him to just answer the question. He didn't want
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Speaker 2: to give the yes or no that the prosecutor was
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Speaker 2: looking for because he wanted to add his own extra
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Speaker 2: explanation to things, and the judge just kept shutting him
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Speaker 2: down and striking a few of his answers from the record,
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Speaker 2: even which just isn't a great look in front of
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Speaker 2: the jury. So it was pretty rough, and clearly it
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Speaker 2: didn't have the impact that he was hoping for because
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Speaker 2: he was found guilty.
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Speaker 1: He testified that he didn't believe that there was any
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Speaker 1: law that barred him from making trades in the minutes
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Speaker 1: and hours after he published social media post or research reports.
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Speaker 1: I mean, was that part of the defense case that
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Speaker 1: there's no law against this?
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Speaker 2: Yeah, And you know what, he's right on that, and
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Speaker 2: the government couldn't really claim otherwise. So on the one hands. Yes,
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Speaker 2: that's true. But on the other hand, the government was
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Speaker 2: pointing to other evidence that said he was doing more
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Speaker 2: than just trading around his research reports tweets that it
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Speaker 2: was a little worse than that. Well, it was fraud
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Speaker 2: according to the government and the jury. So it is
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Speaker 2: a really interesting point though, because that is the chilling
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Speaker 2: effect that mister Luft and his lawyers have said would
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Speaker 2: hit the short selling industry if he were convicted, and
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Speaker 2: actually already hit the industry after he was indicted. So
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Speaker 2: it's hard to say because in effect, we have, you know,
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Speaker 2: regulations now in place with this industry via a jury verdict,
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Speaker 2: which isn't normally how regulations are put in place. So
6:28
Speaker 2: maybe we'll see some of those in the future. But
6:30
Speaker 2: all the experts that I've been talking to, i mean,
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Speaker 2: the lead up to this trial and earlier today and
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Speaker 2: last night, have just been saying that this will have
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Speaker 2: a chilling effect on the industry, an industry that's already
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Speaker 2: you know, sort of withering and having some tough times
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Speaker 2: because of market considerations. But you know, where's the line.
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Speaker 2: That's what people aren't exactly sure, so they're going to
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Speaker 2: be more timid.
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Speaker 1: Yeah, I was going to ask you if this trial,
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Speaker 1: if the verdict showed where the line was between statements
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Speaker 1: of opinion and when it crosses into market manipulation.
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Speaker 2: Yeah, I wish I could answer that, but I really
7:05
Speaker 2: don't think it did. I guess that's the answers. I
7:08
Speaker 2: don't think it really drew a clear line because they're
7:10
Speaker 2: a very specific set of circumstances involving a specific individual,
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Speaker 2: and so how do you apply that to everyone else
7:18
Speaker 2: who's doing things a little differently or much differently, and
7:21
Speaker 2: the fear of being that because of that uncertainty, maybe
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Speaker 2: you just don't engage in that type of behavior the
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Speaker 2: way that you would. But you know, I don't think
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Speaker 2: that any short seller out there would probably say that
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Speaker 2: they're doing exactly the same thing as mister Left.
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Speaker 1: The experts that I spoke to before the trial said
7:39
Speaker 1: that they thought this was an uphill battle for the prosecution.
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Speaker 1: So the jury was out two days, they didn't convict
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Speaker 1: him on all the charges, So how did they see it?
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Speaker 2: So? Right? I mean, normally, if you get a really
7:52
Speaker 2: fast verdict on the first you know, just after deliberations,
7:55
Speaker 2: then it's probably going to be a guilty verdict. And
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Speaker 2: I'm sure, that's what the prosecution was hoping for. But
8:00
Speaker 2: they did get the guilty berth they wanted. But it
8:02
Speaker 2: spanned two full days of deliberations plus a little extra
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Speaker 2: on the first day, and so they clearly were looking
8:09
Speaker 2: at this evidence very closely, very very closely, and at
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Speaker 2: one point they sent a note back to the judge
8:15
Speaker 2: during deliberations as they often do, and ended up having
8:19
Speaker 2: the court report come in and read the entire transcript
8:23
Speaker 2: of a specific witness to them back and forth. The
8:25
Speaker 2: direct examination, the cross examination, the whole thing, and it
8:29
Speaker 2: was the testimony of Citron Capital's lawyer, securities lawyer, the
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Speaker 2: one who testified that he had sort of reviewed the
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Speaker 2: trading strategy and didn't see anything illegal about it. It
8:41
Speaker 2: was hard to read the tea leaves on what that
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Speaker 2: meant at the time why they wanted to hear that again,
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Speaker 2: but clearly they determined that even though the lawyer had
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Speaker 2: given the green light to this trading strategy, he actually
8:54
Speaker 2: didn't have all the information about what mister Left was
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Speaker 2: up to, which is what was revealed on the cross
8:59
Speaker 2: examination of the witness. So as far as the four
9:02
Speaker 2: counts that he was found not guilty on again, I
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Speaker 2: think that would point to how closely they were looking
9:07
Speaker 2: at the evidence on each of those counts. The first
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Speaker 2: count of securities fraud was the overall overarching fraud scheme,
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Speaker 2: and then counts two through seventeen were for individual stocks
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Speaker 2: that he was accused of manipulating. So on four of
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Speaker 2: those they looked at the evidence that the government had
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Speaker 2: presented and decided that it just didn't quite go as
9:27
Speaker 2: far as the other ones went. We didn't speak to
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Speaker 2: the jurors, so I don't know exactly how that played
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Speaker 2: into it, but I think we can just assume that
9:34
Speaker 2: they looked at the evidence and they couldn't reach unanimity
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Speaker 2: on it.
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Speaker 1: Eric, I always like to hear about some of the
9:39
Speaker 1: colorful events that go on in the courtroom that you
9:43
Speaker 1: might miss reading an article about the trial. So explain
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Speaker 1: why on the day of the verdict the judge had
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Speaker 1: threatened to put left in custody.
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Speaker 2: Right So yesterday morning, the jury started deliberating at eight am,
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Speaker 2: as they had the day before, and they had that
10:03
Speaker 2: note that I mentioned where they wanted to have that
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Speaker 2: transcript read back to them, and the judge got that
10:08
Speaker 2: note first thing in the morning, and so around a
10:12
Speaker 2: thirty nine or so she called the judge called court
10:15
Speaker 2: to session without the jury yet they were going to
10:18
Speaker 2: be brought in. But when the judge came in, a
10:21
Speaker 2: mister Left's legal team had to tell him that he
10:23
Speaker 2: wasn't in the building. And so we don't know why
10:26
Speaker 2: he wasn't, If he was late, or if he just
10:28
Speaker 2: didn't think he needed to be there that early because
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Speaker 2: it was so unlikely that they would have a verdict
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Speaker 2: by then. We just don't know. But she was very angry.
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Speaker 2: She threatened to throw him in jail or have him
10:40
Speaker 2: taken into custody rather until a verdict was reached if
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Speaker 2: he did that again, and ordered him to remain in
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Speaker 2: the building while the jury is there deliberating. And eventually
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Speaker 2: he did show up. I was actually standing out in
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Speaker 2: the hallway and saw him tearing around the corner in
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Speaker 2: a real rush and ran into court and she delivered
11:00
Speaker 2: that threat again to him directly once he had arrived,
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Speaker 2: and he apologized, and we don't know why he was late,
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Speaker 2: and we moved on, Well, you.
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Speaker 1: Don't want the person who's sentencing you angry at you.
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Speaker 1: So how much time is he actually facing?
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Speaker 2: The government says maximum twenty five years on that first
11:16
Speaker 2: main count I mentioned right, then twenty years for each
11:19
Speaker 2: of the other ones. Of course, we know that a
11:21
Speaker 2: judge almost always is going to run those concurrent so
11:24
Speaker 2: that the maximum would be twenty five years essentially. But then,
11:28
Speaker 2: of course we also know often these sentences are much
11:31
Speaker 2: less than the maximum, so I really can't say he's
11:34
Speaker 2: most likely going to appeal. He certainly hinted at an appeal.
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Speaker 2: You know, they've also asked for a mistrial. By the way,
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Speaker 2: another bit of color. This was the strangest jury verdict
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Speaker 2: delivering I've ever seen. Once the verdict was reached, everyone
11:49
Speaker 2: came into court, everyone's you know, waiting to find out
11:52
Speaker 2: what this verdict is. The jury comes out, they say
11:56
Speaker 2: that they've reached a verdict. They hand the verdict to
11:59
Speaker 2: the judge, who has practiced reads it carefully at her desk,
12:05
Speaker 2: and then she calls a sidebar where she wants all
12:08
Speaker 2: the lawyers and mister left to come up around the
12:11
Speaker 2: side of the where she sits and have a private conversation.
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Speaker 2: And that has just never seen that before. The verdict
12:19
Speaker 2: is about to be delivered, and they're talking for a
12:22
Speaker 2: long time, and eventually she reveals that the jury all
12:27
Speaker 2: this time had filled out an incorrect verdict form. Yeah,
12:32
Speaker 2: it was outdated because it included an eighteenth charge of
12:35
Speaker 2: lying to federal investigators that had been dismissed before the trial.
12:40
Speaker 2: So that's why the Left lawyers requested a mistrial, and
12:45
Speaker 2: the judge said that she would rule on that later.
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Speaker 1: I doubt that she would declare a mistrial over that,
12:51
Speaker 1: although you never really know. Has the defense mentioned any
12:56
Speaker 1: issues it might raise on appeal. I assume that having
13:00
Speaker 1: the wrong jury verdict form will be one of them.
13:03
Speaker 2: I did speak with mister left right outside court after
13:05
Speaker 2: he was sentenced. He did say that this wasn't the
13:08
Speaker 2: end of the story. I think it's pretty clear that
13:11
Speaker 2: he was hinting at an appeal. We don't know anything
13:14
Speaker 2: about that yet or how quickly that might happen, or
13:17
Speaker 2: but it is for him a matter of free speech.
13:20
Speaker 2: He gave a rather lengthy explanation of how he thinks
13:24
Speaker 2: it's going to chill people who want to comment on
13:27
Speaker 2: stocks and trade about it. You know, again, as we
13:30
Speaker 2: discussed before, there's different views about that exactly what he
13:33
Speaker 2: was doing, but he just clearly sees it as a
13:37
Speaker 2: free speech matter.
13:38
Speaker 1: The Trump administration has dropped a lot of white collar
13:42
Speaker 1: cases that were started in the Biden administration, as this
13:45
Speaker 1: one was. Do you have any inkling as to why
13:47
Speaker 1: they kept going on this one?
13:50
Speaker 2: I don't. Unfortunately, I do know that mister Left's lawyer
13:55
Speaker 2: made some outreach directly to the administration on this issue
14:00
Speaker 2: and tried to say, hey, you've made it clear your
14:03
Speaker 2: priorities are different. This case should be one that goes
14:06
Speaker 2: away as well. And obviously that outreach was unsuccessful. But
14:11
Speaker 2: in terms of why the government decided to go ahead
14:14
Speaker 2: with this one, it's anyone's guests. I mean, prosecutors really
14:18
Speaker 2: did focus their closing arguments on the notion that mister
14:22
Speaker 2: Left was misleading and manipulating and taking advantage of retail investors,
14:27
Speaker 2: you know, average folks. So perhaps that had something to
14:32
Speaker 2: do with the way they looked at at the case.
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Speaker 1: That seems like a good reason for continuing the case.
14:38
Speaker 1: Thanks so much, Eric, that's Bloomberg Legal reporter Eric Larson.
14:42
Speaker 1: The Customs and Border Protection Agency opened a refund portal
14:47
Speaker 1: on April twentieth for more than three hundred and thirty
14:50
Speaker 1: thousand firms that paid import taxes under President Trump's use
14:55
Speaker 1: of the International Emergency Economic Powers Act or AIPA. That's
15:00
Speaker 1: signaled that it intended to repay at least some of
15:02
Speaker 1: the approximately one hundred and sixty six billion dollars in
15:06
Speaker 1: levies struck down by the Supreme Court earlier this year.
15:10
Speaker 1: The first batch of payments came quickly, but now legal
15:14
Speaker 1: chaos may be injected into the claims process that's already underway.
15:19
Speaker 1: The Trump administration has filed a notice that it will
15:22
Speaker 1: appeal a court order compelling customs authorities to recalculate all
15:28
Speaker 1: import taxes that the administration collected under AEPA. My guest
15:33
Speaker 1: is trade law expert Timothy Brightbill a partner Wilie Rhyan. So, Tim,
15:38
Speaker 1: last time we talked about how the refund process was
15:42
Speaker 1: rolling along, how the portal was working.
15:45
Speaker 3: What happened, Well, we've had a series of very significant
15:50
Speaker 3: developments in the last week for those parties seeking refunds
15:56
Speaker 3: of the tariffs paid under AEPA, the tariffs that were
15:59
Speaker 3: struck down by the Supreme Court. So, first of all,
16:03
Speaker 3: last Wednesday, Judge Eaton issued an order asking the Customs
16:10
Speaker 3: and Border Protection and the Justice Department to explain not
16:16
Speaker 3: only the status of refunds being paid, but also calling
16:23
Speaker 3: the Customs and Border Protection Commissioner Rodney Scott to testify
16:29
Speaker 3: in court as to the delays in the process. So
16:34
Speaker 3: a very noteworthy escalation of the process. Then two days later,
16:39
Speaker 3: last Friday, Customs and Border Protection responded to Judge Eaton
16:45
Speaker 3: said that it would be improper to call on Commissioner Scott,
16:50
Speaker 3: who is presidentially nominated and Senate confirmed, to have to
16:53
Speaker 3: appear to answer the Court's questions. And then also Customs
16:58
Speaker 3: challenged the court or in a way that I think
17:02
Speaker 3: makes it clear that it is going to be difficult
17:04
Speaker 3: for some importers to potentially receive refunds of their idea
17:10
Speaker 3: of duties. So Customs has been paying refunds and has
17:16
Speaker 3: refunded about eighty five billion dollars of tariffs or is
17:19
Speaker 3: in the process of refunding those tariffs. But those are
17:24
Speaker 3: tariffs that were never liquidated or finalized. They were always
17:29
Speaker 3: sort of held in suspension and not finalized, and therefore
17:32
Speaker 3: they were still in Customs control. The bigger question is
17:36
Speaker 3: for tariffs that were paid on entries that have been liquidated,
17:41
Speaker 3: that have been finalized, and what to do with those.
17:45
Speaker 3: And in this most recent filing, Customs has said it
17:49
Speaker 3: has no authority to re liquidate or refund money without
17:54
Speaker 3: a court order. So what that seems to mean is
17:59
Speaker 3: that or parties that have filed a case in the court,
18:03
Speaker 3: there may be a way to refund the money, but
18:05
Speaker 3: for parties that have not filed cases in the court,
18:09
Speaker 3: Customs claims it does not have the authority to refund
18:13
Speaker 3: money without a court order. So that's a very significant
18:16
Speaker 3: change from this automated system that was moving along. Customs
18:21
Speaker 3: was providing the court with updates, but now there seems
18:25
Speaker 3: to be a roadblock and things seem to be coming
18:28
Speaker 3: to a head.
18:29
Speaker 4: Why do you think this happened.
18:31
Speaker 5: Do you think that this is really about the technicality
18:35
Speaker 5: about having filed a lawsuit or not, or it's a
18:38
Speaker 5: Trump administration attempt not to pay or desire not to
18:42
Speaker 5: pay these tariff refunds.
18:44
Speaker 3: Well, I think it's a combination of both of those factors.
18:48
Speaker 3: First of all, Customs is claiming that it doesn't have
18:50
Speaker 3: any authority under the law to re liquidate duties that
18:56
Speaker 3: have already been finalized unless there is a court order
19:00
Speaker 3: telling them to do so. So the legal reason they're
19:03
Speaker 3: claiming is that they don't have the authority to pay
19:06
Speaker 3: refunds on these entries. Now, I think the practical reason
19:10
Speaker 3: is that there are billions of dollars worth of entries
19:14
Speaker 3: by smaller importers that have not filed suit, and it's
19:18
Speaker 3: likely that the Trump administration does want to keep that
19:20
Speaker 3: money and doesn't want to refund it. So in effect,
19:23
Speaker 3: that seems to be forcing companies to file lawsuits in
19:28
Speaker 3: order to get their money back. And in fact, we've
19:31
Speaker 3: been recommending to our clients now for we were fairly
19:34
Speaker 3: neutral on this for most of the last year, but
19:37
Speaker 3: a couple of months ago we started recommending to our
19:40
Speaker 3: clients that if you want to be sure, we think
19:42
Speaker 3: the best course of action is to file a lawsuit
19:44
Speaker 3: at the Court of International Trade. These recent orders seem
19:48
Speaker 3: to confirm that that is the step that many importers
19:52
Speaker 3: will want to think carefully about taking. It's, of course,
19:54
Speaker 3: an individual company decision based on their own circumstances, but
19:58
Speaker 3: we think that this means it's more likely that more
20:00
Speaker 3: lawsuits will be filed to try and ensure the refunds
20:03
Speaker 3: will happen.
20:04
Speaker 1: That sounds like a lot of lawsuits will that clog
20:09
Speaker 1: up the Court of International trade well.
20:12
Speaker 3: The Court has handled hundreds and thousands of lawsuits before.
20:15
Speaker 3: There have been prior cases, some involving anti dumping and
20:19
Speaker 3: kunter ailing duties, some involving harbor maintenance tax and other
20:23
Speaker 3: customs provisions. So the court can handle these large cases.
20:27
Speaker 3: I think it would prefer to have customs set up
20:31
Speaker 3: an automated process so that companies don't have to face
20:35
Speaker 3: the burden of filing these individual lawsuits. But the Court
20:37
Speaker 3: can handle it. They've done it before, but it will
20:40
Speaker 3: create a burden for all parties involved.
20:43
Speaker 1: Coming up next, I'll continue this conversation with trade attorney
20:47
Speaker 1: Timothy Brightbill. We'll take a look at some of the
20:50
Speaker 1: other tariffs that President Trump has imposed or will impose.
20:54
Speaker 1: I'm June Grosso. When you're listening to Bloomberg, I've been
20:59
Speaker 1: taught looking to trade law expert Timothy Brightbill, a partner
21:03
Speaker 1: Wilie Ryan, about the Trump administration appealing a court order
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Speaker 1: compelling customs authorities to recalculate all the import taxes that
21:14
Speaker 1: the administration collected under President Donald Trump's use of the
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Speaker 1: International Emergency Economic Powers Act or IEPA. The Supreme Court
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Speaker 1: struck down those tariffs in a six to three decision
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Speaker 1: in February. Tim let's talk about some of the many
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Speaker 1: other tariffs. So many tariffs, so little time. The Section
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Speaker 1: one twenty two tariffs, the ten percent tariffs, Where do
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Speaker 1: they stand?
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Speaker 3: So those tariffs are still for the most part in effect. Again,
21:48
Speaker 3: those are tariffs based on balance of payments authority, and
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Speaker 3: the law does authorize the president to impose tariffs of
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Speaker 3: up to fifteen percent to one hundred and fifty days.
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Speaker 3: So what President Trump did was declare ten percent universal tariffs,
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Speaker 3: and those are in effect until July twenty fourth. Now,
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Speaker 3: the Court of International Trade has already struck down those tariffs.
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Speaker 3: In a two to one decision. One judge dissenting, found
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Speaker 3: that those tariffs were inappropriately applied and that the administration
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Speaker 3: used the justification of trade deficits. But of course there's
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Speaker 3: a difference between a trade deficit and a balanced human's deficit,
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Speaker 3: so the court found that those tariffs were not properly applied.
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Speaker 3: The administration has already appealed to the Court of Appeals
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Speaker 3: for the Federal Circuit and those arguments are being heard,
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Speaker 3: but it is unlikely that this will get all the
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Speaker 3: way through the courts by the time the Section one
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Speaker 3: twenty two tariffs expire on July twenty fourth, So even
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Speaker 3: though the peals are going on, the ten percent tariffs
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Speaker 3: were not stayed except for the actual parties through the lawsuits.
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Speaker 3: So that means most companies, most importers are still paying
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Speaker 3: those ten percent tariffs on all entries.
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Speaker 4: So assuming that President Trump wants to continue these two traffs,
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Speaker 4: what can they replace that with come July.
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Speaker 3: Well, that process is already underway. You're right this president.
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Speaker 3: Tariffs are his favorite word in the English language for
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Speaker 3: a reason, and so the work is already underway on
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Speaker 3: the replacement for those tariffs, which would be done under
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Speaker 3: section three oh one of the Trade Act. Section three
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Speaker 3: oh one, as you'll recall, is the authority that was
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Speaker 3: used in the first Trump administration to impose tariffs on
23:46
Speaker 3: hundreds of billions of dollars of Chinese imports, and China
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Speaker 3: then retaliated against US imports as well. Those Section three
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Speaker 3: oh one tariffs are still in place. Section three oh
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Speaker 3: one just requires a finding that there are foreign practices
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Speaker 3: that are unreasonable and that burden or restrict US commerce.
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Speaker 3: So it's a very broad test and it has been
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Speaker 3: found to meet situations like the Chinese forced technology transfer,
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Speaker 3: data localization laws, cyber hacking, and so forth. And then
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Speaker 3: to ensure that that authority is available, the administration started
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Speaker 3: a series of Section three h one investigations looking at
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Speaker 3: structural overcapacity from a number of countries and also the
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Speaker 3: lack of forced labor laws or strong forced labor laws
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Speaker 3: in many other countries. So that process is underway. There
24:45
Speaker 3: were a series of hearings held here in Washington on
24:50
Speaker 3: Section three h one on this overcapacity issue and forced
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Speaker 3: labor issue in late April and early May. And we
24:58
Speaker 3: are probably getting close to the point where the US
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Speaker 3: Trade Representative will announce or propose some new tariffs under
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Speaker 3: Section three oh one, with the goal being that those
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Speaker 3: tariffs will be finalized and in place by the time
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Speaker 3: that the ten percent Section one twenty two tariffs expire
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Speaker 3: on July twenty fourth.
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Speaker 4: So it seems to you like those tariffs will survive
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Speaker 4: a court challenge.
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Speaker 3: In the past, they have. So the tariffs brought during
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Speaker 3: the first Trump administration under Section three zhoo one were
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Speaker 3: largely upheld by the courts as reasonable and within the
25:37
Speaker 3: President's discretions, with some exceptions, and there are still court
25:41
Speaker 3: challenges going on against those original tariffs from twenty eighteen,
25:47
Speaker 3: so the courts could rule, but so far those tariffs
25:51
Speaker 3: have been upheld again because the law is broad and
25:55
Speaker 3: gives the president a good deal of discretion, and so
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Speaker 3: the courts in the past have mostly deferred to the
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Speaker 3: president's discretion, although again we're in unprecedented territory here given
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Speaker 3: the scope of these investigations that the Trump administration has undertaken.
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Speaker 4: Moving on to national security tariffs.
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Speaker 3: These tariffs are done under Section two thirty two of
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Speaker 3: the Trade Act, which basically assesses are imports of a
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Speaker 3: certain good or item a threat to US national security,
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Speaker 3: and these were the basis for tariffs of twenty five
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Speaker 3: percent that were put on steel and aluminum imports during
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Speaker 3: the first Trump administration and which have continued since. Similarly,
26:42
Speaker 3: in the current Trump administration, tariffs have been put, for example,
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Speaker 3: on wood products like cabinets and furniture and softwood lumber,
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Speaker 3: and on copper and on other types of goods. So
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Speaker 3: there were about a dozen Section two thirty two investigations
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Speaker 3: started within the last year or so. Some of those
27:03
Speaker 3: are completed, others are still underway. One that is coming
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Speaker 3: to a conclusion relates to polysilicon that is used in
27:13
Speaker 3: solar cells and solar modules. The Commerce Department has already
27:18
Speaker 3: done its study as to whether or not imports our
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Speaker 3: threat to national security. That study has gone to the President,
27:25
Speaker 3: who now has ninety days to decide what sort of
27:29
Speaker 3: relief to apply. So there are a number of these
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Speaker 3: national security investigations going on. For the most part, if
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Speaker 3: a national security tariff is applied, then the Section three
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Speaker 3: h one tariffs have not applied, so there is not
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Speaker 3: stacking of the national security tariffs with the Section three
27:47
Speaker 3: oh one TIFFs at any rate. It's a very convoluted
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Speaker 3: landscape and it's changing on a daily, weekly, monthly basis.
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Speaker 3: For example, just yesterday, USTR ounce potential new tariffs of
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Speaker 3: twenty five percent on Brazil due to unreasonable practices under
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Speaker 3: Section three to zero one. So it requires careful monitoring
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Speaker 3: by everyone involved. Anyone who's importing from dozens of countries
28:15
Speaker 3: needs to be aware of all the latest developments.
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Speaker 4: It's exhausting, and as you say, it's it's constantly changing.
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Speaker 4: What's the effect on the economy of it? Never seems
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Speaker 4: that tariffs do the economy any good. But Trump loves them.
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Speaker 3: It's very difficult to say the overall impact on the
28:32
Speaker 3: economy of all of these tariffs. Certainly it's possible to
28:36
Speaker 3: do limited or specific tariffs without causing harm to the economy,
28:41
Speaker 3: without driving up inflation. But these tariffs are of unprecedented
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Speaker 3: scale and scope, and it is remarkable that the US
28:50
Speaker 3: economy is doing as well as it is given not
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Speaker 3: only these tariffs. But the uncertainty caused by all the
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Speaker 3: changes is never good for businesses. Our clients would rather
29:03
Speaker 3: have a stable environment. They would rather know what the
29:06
Speaker 3: tariff levels are and what they're going to be for
29:08
Speaker 3: years to come, so that they can plan their capital
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Speaker 3: improvements and investments. So this does make it very difficult
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Speaker 3: for companies and industries to grow, and the last many
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Speaker 3: of them are investing. And again, the US economy is
29:21
Speaker 3: holding up rather well despite the turmoil.
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Speaker 4: So now let's talk about the US China relationship and
29:29
Speaker 4: how that plays in here.
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Speaker 3: Yes, so we recently have the summit between Presidents Trump
29:35
Speaker 3: and She, and I would say the outcomes from that
29:38
Speaker 3: summit were rather modest. There was discussion about a potential
29:44
Speaker 3: Board of Trade to handle certain difficult trade issues, but
29:48
Speaker 3: really not major developments from that summit, whoms like both
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Speaker 3: countries would like to continue engagement and continue to grow
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Speaker 3: their own economy is without escalating to even higher and
30:04
Speaker 3: higher levels of tariffs. So we'll have to see. I
30:07
Speaker 3: think there's one of two outcomes likely either a continued
30:10
Speaker 3: sort of standoff in detent at the current tariff levels,
30:14
Speaker 3: or some sort of escalation based on export controls or
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Speaker 3: chip issues or rare earth and magnet issues that causes
30:24
Speaker 3: both sides to react with even more aggressive actions trade
30:29
Speaker 3: actions going forward.
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Speaker 4: So tim tariffs are not an issue that I think
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Speaker 4: about when I think about the midterm elections coming up.
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Speaker 1: But what role do you think tariffs will play in
30:40
Speaker 1: the midterms.
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Speaker 3: I think the elections are always affected by economic issues,
30:45
Speaker 3: as presidents have famously said over the years, So I
30:49
Speaker 3: think you've seen that affordability is likely going to be
30:53
Speaker 3: the key issue of the midterm elections as well as
30:57
Speaker 3: the presidential elections in two years. And so really the
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Speaker 3: question is does the American public think that tariffs have
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Speaker 3: an effect on affordability and that will play an important
31:10
Speaker 3: role in how votes are cast. So it is a
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Speaker 3: very important issue. I think numbers of Congress feel it
31:18
Speaker 3: acutely with the House and the Senate and the balance,
31:22
Speaker 3: and the Trump administration is aware as well. So even
31:25
Speaker 3: though this administration is very much in favor of tariffs
31:30
Speaker 3: and an aggressive trade policy, they also have an eye
31:33
Speaker 3: on the stock markets and they have an eye on
31:36
Speaker 3: what regular Americans are feeling in terms of paying more
31:40
Speaker 3: for goods and services.
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Speaker 1: Thanks so much, Tim for sharing your expertise in this area,
31:44
Speaker 1: which requires expertise because it's so complicated. That's Timothy Bright Bill,
31:50
Speaker 1: a partner Wilie Ryan. In other legal news, today, Acting
31:54
Speaker 1: Attorney General Todd Blanch was grilled by lawmakers from both
31:58
Speaker 1: parties about President trumps so called Anti Weaponization Fund. The
32:04
Speaker 1: administration says the one point seventy seven billion dollar fund
32:09
Speaker 1: would be used to compensate alleged victims of political persecution
32:14
Speaker 1: under the Biden administration, but it's being held up in
32:17
Speaker 1: the courts to determine whether it's legal. And now Blanche
32:20
Speaker 1: says the Justice Department is not moving ahead with the fund.
32:25
Speaker 2: You're right that there's a date that in the case
32:28
Speaker 2: in the Eastern Sco Virginia in June, but we are
32:31
Speaker 2: not moving forward with the fund.
32:33
Speaker 1: But under questioning by Representative Rosa Deloro, a Democrat from Connecticut.
32:39
Speaker 1: Blanche admitted that nothing has changed with the part of
32:42
Speaker 1: the deal where the irs agreed to drop all pending
32:45
Speaker 1: and future probes of Trump and his family.
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Speaker 6: This is really pretty extraordinary that we are going to
32:56
Speaker 6: forever barred and precluded from I'm examining or prosecuting the President,
33:03
Speaker 6: his sons, and the Trump organization's current tax Finally, simply put,
33:08
Speaker 6: you just gave the president's family of tax immunity to
33:12
Speaker 6: the tune of about one hundred million dollars. Not true, Well,
33:15
Speaker 6: yes you have my friends.
33:17
Speaker 1: Judges in Virginia and Maryland are considering the fund. And
33:22
Speaker 1: that's it for this edition of The Bloomberg Law Show.
33:24
Speaker 1: Remember you can always get the latest legal news on
33:27
Speaker 1: our Bloomberg Law podcasts. You can find them on Apple Podcasts, Spotify,
33:31
Speaker 1: and at www dot Bloomberg dot com, slash podcast Slash Law,
33:37
Speaker 1: And remember to tune into The Bloomberg Law Show every
33:39
Speaker 1: weeknight at ten pm Wall Street Time. I'm June Grosso
33:43
Speaker 1: and you're listening to Bloomberg