Latest / Beyond Fulfillment Podcast / Navigating Tariff Turmoil: Supreme Court Rulings, Refund Chaos, and the Future of Trade

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Navigating Tariff Turmoil: Supreme Court Rulings, Refund Chaos, and the Future of Trade · Beyond Fulfillment Podcast

• 0:00
  Foreign.
• 0:06
  Welcome to Beyond Fulfillment.
• 0:09
  Today I have a very special episode with Jim Tompkins, supply chain legend and a frequent contributor on this show.
• 0:17
  And then also a brand new guest, Dan Kraus, who's a supply chain consultant with 30 plus years in international trade experience.
• 0:26
  And we're here specifically today to talk about this recent Supreme Court ruling on the legality of the tariffs that have been enacted by President Trump.
• 0:37
  So let's get right into it.
• 0:39
  So one sentence each.
• 0:41
  What did the ruling actually end and what did it begin?
• 0:45
  Jim, you go first.
• 0:47
  Well, the ruling did not end tariffs.
• 0:52
  232, 301, 122, 338 are all good to go.
• 0:58
  What it ended was President Trump using the Emergency Economic Power Act, EAPA to announce changes and to negotiate on tariffs.
• 1:10
  And Trump was using EAPA as kind of a light switch.
• 1:14
  On, off, on, off, very this, bury that as a negotiation tool.
• 1:19
  So it ended Trump using EAPA in a way that allowed him to negotiate.
• 1:25
  What it began was a new level of uncertainty that's come about that's, you know, kind of driving a lot of us crazy.
• 1:34
  It's got huge uncertainty that I'm sure we'll get into on the refunds.
• 1:39
  It's a huge uncertainty on the power struggle that's going to come out of Congress.
• 1:43
  And what's Congress going to do now?
• 1:46
  And then the third is for the administration, its search for new substitutes, new statutes that it can use to find a way to enforce the tariffs that they think are important.
• 2:00
  Okay, Dan, from my perspective, it kind of ended tariffs by proclamation from the administrative standpoint, the administration and got more back to regular order in terms of tariffs.
• 2:14
  Where.
• 2:16
  And I think some of the justices with their dissenting opinions kind of laid that out, saying basically the emergency use authorization was not really designed for tariffs.
• 2:32
  And it's kind of interesting because, you know, the administration could have embargoed an entire country under that and it would have been okay, but you can't use it for fentanyl, reciprocal tariffs and those types of things.
• 2:46
  So there's an extreme element to the emergency tariffs.
• 2:50
  And they came back and said, no, tariffs are really a tax.
• 2:55
  And even though the president under that has the ability to regulate trade, he has to do it without using tariffs was the basic ruling.
• 3:04
  So now we're back to regular order and tariffs by statute.
• 3:10
  And there's plenty of them out there that are in the quiver now for the administration to, to pull out.
• 3:16
  But to Jim's point, it does create uncertainty.
• 3:19
  Which one's going to be used when, when it's going to be used.
• 3:22
  You've got review periods associated with that that take some time.
• 3:28
  And then the, the whole refund issue is a commercial mess potentially.
• 3:34
  And you've got 300,000 importers, probably 180 billion, that are up for grabs in terms of a potential refund.
• 3:44
  And then you've got, if you, if the process is well defined, then you have commercial implications in regard to, you know, if you had 5% on a line item with Home Depot as an invoice, you know, expect a
• 3:58
  call from Home Depot saying, where's my 5% that you charge me for?
• 4:02
  So there's commercial issues that tie to this as well that could be quite messy.
• 4:07
  And some of the justices mentioned that in their, you know, their opinions that they published.
• 4:15
  So there's a lot of issues on the table right now.
• 4:18
  Okay, so let's go over specifically what the court decided, what it didn't, and then what replaced it in 96 hours.
• 4:25
  The, the ruling in plain English, Dan, the ruling in plain English was IEA cannot be used for tariffs.
• 4:35
  That was the, the bottom line.
• 4:37
  And within minutes, you know, Trump at a press conference, and they basically said, okay, we're gonna, we're going to put 10% tariffs under 122 for all of the countries that were previously impacted by iepa.
• 4:53
  And then the following day they said, oh, wait a minute, we're going to take that up to 15, which is the statutory limit.
• 5:00
  Now, 15 hasn't gone into place, but it did create within 24 hours some uncertainty.
• 5:06
  Is it 10?
• 5:07
  Is it 15?
• 5:08
  You know, what is it?
• 5:10
  And then immediately the many in the trade community came out and said, well, that will likely be struck down because 122 is specifically designed for a balance of payment issue.
• 5:25
  And with the tariff work that's gone on, you can't really maybe win the current account argument.
• 5:32
  You probably can't win the trade deficit argument in order to get that through, but it would take a lot of time as it relates to that being fought in the courts, and it probably will be a challenge, but
• 5:44
  it lasts until 150 days.
• 5:47
  I think July 24th is the official expiration date.
• 5:51
  It can be extended beyond that with a bit of a pause.
• 5:54
  But there are others, and I believe they're probably going to pivot to something like 338, and we can talk further about what that is.
• 6:04
  Okay, Jim?
• 6:06
  Well, I agree with what Dan said about what they decided and what they didn't decide.
• 6:14
  It's a very narrow Ruling, in my view, which is what the Supreme Court does.
• 6:20
  The Supreme Court is supposed to answer questions which are explicitly asked of them.
• 6:28
  So they were asked the question, can Trump use EAPA to come up with tariffs?
• 6:38
  And the answer to that is no.
• 6:41
  Now, the thing that's a little bit amazing to me, if you read epa, and I'm no trade attorney, I'm no expert on this, but if you read EPA, a first year law student is, in less than 10 minutes
• 6:55
  can say no.
• 6:57
  This tariff, this statute does not allow you to put tariffs force.
• 7:03
  That's not what it says.
• 7:05
  And I think it's amazing because so the supreme court had a 10 minute job.
• 7:09
  We all anticipated that they would have this ruling, but it took them from September 9 to February 20, 164 days to meet to reach a decision that we all kind of knew what it was going to be.
• 7:26
  And so I find that very disheartening.
• 7:30
  But it's the way it was set up by our founding fathers.
• 7:33
  The Supreme Court is supposed to interpret laws.
• 7:36
  And what they have been pushed into is a situation where they're determining how the economy and how global trade works.
• 7:43
  And that's not really what they're qualified to do.
• 7:46
  So they didn't decide the issues which are really important.
• 7:51
  They did decide correctly what the law says, but that was somewhat of a trivial thing.
• 8:00
  So I think what we saw happen in the 96 hours that followed is we went from tariff by emergency, the Emergency Economic Powers act, to tariffs by statute and committee.
• 8:14
  And so I think Dan is absolutely correct.
• 8:17
  Where we are is back to what order is.
• 8:20
  And Trump's use of eapa, was that a good decision or a bad decision?
• 8:24
  I think using EAPA was a good decision to negotiate tariffs because it gave him the freedom to give and take and to negotiate.
• 8:34
  But the fact of the matter is that's really not what the act was about.
• 8:37
  It's not an emergency economic emergency issue.
• 8:40
  And therefore it was voted to be illegal.
• 8:43
  And so the Supreme Court did their job, but the job that they have is not the one that we need.
• 8:50
  We need something different than what the Supreme Court is chartered to do at this point.
• 8:56
  Okay, so now let's talk about the Customs and Border patrol delay, the $8.2 billion in cargo, and then what that reveals about the System and the 96 Hour Window.
• 9:09
  Jim, you go first.
• 9:11
  Well, the $8.2 billion of goods that are on the water or sitting on a dock someplace, who knows what the status of that is?
• 9:19
  I mean, because the Supreme Court didn't Give us any ruling on that whatsoever.
• 9:24
  And then the 175, 180 billion.
• 9:28
  You know, it's interesting, this number has gone from 160 to 190.
• 9:33
  Dan used the number 180.
• 9:34
  I think that's a good number to use.
• 9:36
  But no one really knows because people were cooking the books on what the prices really are and they were paying a smaller tariff on an impossible number.
• 9:46
  And so there's all sorts of things taking place there.
• 9:49
  But what it does, it comes back to what it reveals is it reveals that the Supreme Court is not set up to do what it's being asked to do.
• 10:04
  Now let me get into that a little bit.
• 10:06
  When the Supreme Court was set up by the constitution, there was 4 million people in the world.
• 10:13
  There was no global supply chains, there was no administrative state, there was no trillion dollar capital flows.
• 10:19
  There was no statutory complexity approaching anything like what we have today in trade and technology.
• 10:26
  And so the Court is not there really.
• 10:30
  The Court is there to interpret the law.
• 10:33
  But what the Court is being held responsible for is tariffs, technology regulations, environmental rules, labor standards, antitrust, health care, intellectual property, and all sorts of different things that they're not trained up to do.
• 10:50
  If you look at the founders, the folks that wrote the Constitution, that defined the role of, of the Supreme Court, 45% of them were lawyers, 55% were merchants, farmers, inventors, publishers, financiers and operators.
• 11:07
  They understood markets, negotiation and economic consequences.
• 11:13
  Today's Supreme Court is 100% lawyers.
• 11:18
  It's zero percent business operators, supply chain people, economists decide, technology people and engineers, they're all lawyers.
• 11:27
  And what they do is they do a brilliant job on statutory interpretation, but they don't answer the questions that really need to be answered.
• 11:39
  And so I think the EAPA ruling is a perfect example of legally precise, economically incomplete.
• 11:51
  And so I think the Supreme Court needs a major rethink because the Court is deciding economic issues.
• 12:00
  Not really.
• 12:02
  It's working on tariffs and EPA and FTC and labor rules.
• 12:05
  That's not what they're qualified to do.
• 12:08
  That's not what they do.
• 12:09
  The Court's narrow rulings, it stays within its lane.
• 12:14
  But then what we wind up with is multi year uncertainty.
• 12:18
  The mess they have created this time is a mess.
• 12:22
  So the economy is now too complex and too intricate for it to be looked at from a legal reasoning point of view.
• 12:32
  Instead, what we need to do is we need to create a new type of court that looks at business issues and helps us solve problems, not give legal interpretations.
• 12:45
  So what this reveals and this isn't a Republican or a Democratic or pro or anti Trump thing.
• 12:52
  It doesn't matter what the ruling was.
• 12:53
  The court did its job.
• 12:55
  But the fact of the matter is we don't have a body to make decisions like the ruling that it was asked to make.
• 13:02
  And therefore we have a major problem with global trade supply chains and how we're going to treat this.
• 13:08
  So it's a huge issue and it's a great opportunity for us to improve what we do.
• 13:15
  All right, Dan.
• 13:16
  Well, and, you know, part of it too, I think people were hoping that the Supreme Court would weigh in on the refund process and they said, no way are we doing that, you know, bottom line, because that's going
• 13:29
  to go to the court of International Trade and there's going to be other things that have to be reviewed as part of that, which was probably the right call on their part.
• 13:38
  Don't weigh into the, you know, the commercial application pool of refunds and how long this will, will take.
• 13:47
  I think the, the bets that are out there now is that the refund process will proceed in some manner, but it's simply going to take some time.
• 13:57
  But you get into that whole 96 hour window in terms of freight on the water and those types of things, it basically shows how automated and brittle the trading system has become when you have a legal authority that
• 14:14
  pauses something and you've got billions of dollars that pause with it, you know, and the system just isn't set up in a smooth manner to be able to deal with the dynamics of what's going on with tariff and
• 14:32
  trade related decisions.
• 14:35
  Trump, as a businessperson wanted to shock the system, if you will, from a geopolitical standpoint.
• 14:43
  And that was part of it, in order to exact leverage on these trading partners.
• 14:50
  And he was using the statute in order to apply that leverage and to begin negotiation dynamics with these various countries.
• 15:02
  Now, it didn't happen as quickly as, you know, I think they would have hoped.
• 15:08
  It takes time to have bilateral agreements with these various countries, but it sure put a whole lot of people on notice.
• 15:17
  And then they started to troll various countries and basically say, hey, we'll reduce your tariff if you have more direct foreign investment and those types of things.
• 15:27
  And of course, Trump always talks about the tote board being up to $18 trillion.
• 15:32
  And I don't know if that's right or it's half that big.
• 15:35
  But regardless, it's a big number.
• 15:39
  And on one side of the ledger people are saying, well, see, it's, it's not working well.
• 15:43
  Noise should not be confused with whether or not the policy is working.
• 15:51
  And that's, I always tell people things like that just take time in order for them to play out.
• 15:56
  But it's a, it's an interesting time.
• 16:00
  And, and now I think everybody's standing by waiting to see how the refund issue plays out.
• 16:07
  Okay.
• 16:07
  All right.
• 16:08
  And Dan, so let's talk about that with the refunds.
• 16:10
  Why is it not as simple as just getting a check?
• 16:15
  Well, the, the, the system has, you know, I think I mentioned earlier, there's 300,000 importers of record, so 180 billion customs has ever all that data on a line item basis.
• 16:30
  Now, if the customer court of international trade, you know, basically says just refund it, they have the amount to do that and they have the mechanism to do that.
• 16:41
  I think the administration and customs is going to hang on to that money like a dog on a red piece of meat.
• 16:49
  I don't think it's going to go back quietly.
• 16:51
  As a matter of fact, last week they basically the administration went to the court and said, hey, can we delay this mandate in terms of how these refunds are going to be issued?
• 17:03
  We have a lot of questions.
• 17:04
  There's political and economic ramifications of that in the lower court.
• 17:08
  The higher court struck it down almost immediately within 24, 36 hours.
• 17:14
  So now we're back to where we were after the ruling, which is it goes to the court of International Trade and they have to come up with, you know, what that mechanism looks like.
• 17:26
  The folks that I'm talking to, especially in the trade attorney related space, most of them are saying, hey, if you had $20,000 worth of tariff exposure in 2025, it's probably not worth your time and effort to go chase
• 17:42
  that.
• 17:42
  Okay?
• 17:43
  But if you're looking at six figures plus, you can probably afford to hire a trade attorney to help you with a protest at the international court.
• 17:53
  And at the same time, you have to look at your liquidation dates in terms of when those entries are going to be liquidated.
• 18:01
  And that's over 300 days from the point they were brought in.
• 18:05
  And during that time you have the ability to go in and do a post summary correction or after litigation, you have the ability or liquidation, you have the ability to go in and file a protest.
• 18:16
  And most of the folks I've talked to said if you have a big number, you probably want to do both.
• 18:22
  And if you're going to file a protest with the courts, you probably don't want to do a cut and paste with an example that's out there on the Internet.
• 18:31
  You probably want to hire a trade attorney in order to help you with that application.
• 18:37
  But it's probably, like I said, if it's a low enough number, it's probably not worth the time and expense to go through that.
• 18:45
  All right, Jim?
• 18:47
  Well, I agree with Dan again.
• 18:50
  And I think in addition to hiring a trade advisor for an attorney, we really need to work with our brokers and decide what is the strategy we want to take.
• 19:04
  I think there's three different strategies we can take, and they're kind of a risk versus return, as Dan points out.
• 19:13
  The first approach is we can take a very quiet approach and file clean, straightforward refund claims and wait and see what happens.
• 19:21
  The second we can take in a very assertive approach and we can push the CBP for timely action and escalate any unclear denials.
• 19:33
  And then the aggressive, the really folks that have a lot of money on the table, they're going to want to do test cases and they want to join industry litigation and get this thing moving as quickly as you
• 19:48
  want.
• 19:49
  The reality is refunds will not be automatic.
• 19:53
  They could they push a button and refund them?
• 19:55
  Of course they could.
• 19:56
  But that's not necessarily going to result in what people are thinking.
• 20:01
  People are thinking, well, I paid more for this item at Walmart and therefore I should get $6 back on tariff.
• 20:07
  Well, that's not going to happen.
• 20:09
  That's not what this is about.
• 20:12
  This is about the people who paid the tariffs getting that as a refund.
• 20:18
  So I think kind of a common sense approach is to start with a roughly a return on investment filter.
• 20:26
  And it says what Dan said is if the potential recovery is small and your entities are scattered, messy and hard to document, forget about it.
• 20:35
  I mean, it's not worth the effort.
• 20:37
  If the potential is large and they're concentrated in a few HTS codes and a few ports and a few well documented cases, then go for it because it's a slam dunk.
• 20:48
  You're going to get things done relatively quickly.
• 20:52
  I think there's a real lesson learned here in that these things, although they're math, it's not clear, you know, people change the prices of some items to pay lower tariffs and, and now what they're going to do is
• 21:09
  try to get that refunded.
• 21:11
  But the fact of the matter is they cook the books on the price that they put in.
• 21:15
  And so not everyone played by the rules and there was a lot of cheating going on.
• 21:19
  So I think what we want to do is make sure we don't spend a dollar to recover 50 cents.
• 21:24
  But at the same time, we need to make sure that we get this done correctly because it's a heck of a lot of money out there.
• 21:34
  I would just, I would just add.
• 21:37
  And a lot of folks haven't thought about this.
• 21:40
  You know, you're talking about months, if not years to potentially recover some of this.
• 21:47
  And I refer to, it's real money, and I understand why people want to get after it.
• 21:52
  But given the timeline for a potential refund, you know, there's a lot of other things you can do with optionality and building resilience around your supply chain in the meantime as it relates to what the administration might do,
• 22:06
  which is, you know, really important.
• 22:10
  The other issue with this is, hey, in 2025, if you built the IEEPA tariffs into your cost of goods, you're going to get a tax bill with your refund.
• 22:20
  And so you better have your tax accountant in the room with your CFO when they're planning this out, because there's a, there's a prize at the end of the refund that a lot of people are thinking about.
• 22:32
  It's like, oh, you're right, we dropped that into our cost of goods.
• 22:35
  So we've got a tax bill if we get that refund back.
• 22:40
  And in addition to that, we have, you know, 4,000 man hours of our top management team messing around with this thing when they should be looking at how to increase customer satisfaction and increase profitability.
• 22:54
  One of the, one of the more interesting ones lately was, you know, FedEx had a lawsuit for their parcel business that was brought in.
• 23:01
  And of course, already they're setting themselves up for a class action lawsuit from their customers saying, hey, wait a minute, they've got to give that money back to me, you know, because I, I bought something from China and
• 23:14
  it was brought in by parcel.
• 23:16
  And of course, the de minimis thing is gone and, you know, and FedEx has no intention of giving that money back without a fight.
• 23:25
  So it's clear.
• 23:26
  It's clear.
• 23:27
  Dave, if you want to get a sponsor with this podcast, you should probably go find some lawyers association, because the lawyers are the ones that are going to really make out on this, not necessarily the people that are,
• 23:41
  you know, do the money well and, you know, the other ones, and they're kind of at the tip of the spear as the customs brokers, you know, And I talked to a group a few weeks ago and I
• 23:50
  said, that's the one group I'm most concerned about because on the front end they're having a hard time keeping up with it and their entries are taking longer regardless of how they're enabled with AI or anything else.
• 24:03
  And then on the back end, they're going to be helping companies with these refunds.
• 24:08
  So they got a hit on the front end, they got a hit on the back end.
• 24:13
  And many of them before the ruling came down that I talked to said, dan, we don't even know how we're going to charge for that.
• 24:20
  I was like, well, you better figure it out because that ruling is coming pretty soon.
• 24:25
  So.
• 24:25
  Yeah.
• 24:25
  And many of them haven't.
• 24:27
  But the other important thing to note here is it's going to be obvious that customs is going to be using AI technology to go through all of those data sets and if they see one line in your dispute,
• 24:43
  they're going to kick the whole thing out.
• 24:44
  They're not going to just kick that line out.
• 24:46
  They're going to kick the whole thing out and you start over again.
• 24:49
  And who knows what other kinds of questions they're going to ask around transfer pricing.
• 24:54
  How much of this did your supplier eat?
• 24:56
  How much did you pass on?
• 24:58
  What'd you do with your pricing?
• 25:00
  You know, IRS related intervention is very possible, which kind of speaks to the whole issue of they're not going to go quietly into the night.
• 25:09
  Their job is to hang on to this money and they're going to try.
• 25:13
  Okay.
• 25:14
  All right, so now let's talk about what survived, what's threatened, and why section 232 should be watching nervously.
• 25:24
  Jim, you first.
• 25:26
  Well, 232 is a statue about national security and national security and economic powers.
• 25:35
  I'm not sure I can differentiate between those words that words that clearly.
• 25:41
  So EAPA and 232, if one is under the microscope, the other one will be as well because it's difficult to determine the differences.
• 25:53
  Now, the existing 232 tariffs on steel and aluminum and quotas under 232, they're going to remain in place, but will they be challenged?
• 26:05
  You know, we're going to have more of the same.
• 26:09
  The court has left itself wide open here for another major case to come to the forefront.
• 26:19
  And you know, is how do you define national security?
• 26:23
  It's the statute is not real clear.
• 26:27
  And so what we have is putting 232 at risk.
• 26:33
  There is some discussion about expanding the use of 232, but when you don't have things that are really tied to national security, you know, what is, is national security.
• 26:46
  Is that defense?
• 26:47
  Is that electronics?
• 26:49
  Is that pharmaceuticals?
• 26:51
  What is that and how can we play that out?
• 26:55
  And so what we see is that 232 is now politically and legally a lightning rod.
• 27:02
  And if we're going to go through that, and goodness knows the people in Washington D.C.
• 27:08
  seem to enjoy this stuff, we're going to have some real challenges.
• 27:12
  So I think the what survived 232 walked out of this case clean because there's no questions asked about it.
• 27:21
  But I do think there's a target on its back.
• 27:23
  And if I had to bet, I'd say 232 is going to be in trouble sometime the next year.
• 27:31
  Dan and I would agree with that.
• 27:34
  And you know, the, they'll leverage 301 as well, which they've already done.
• 27:40
  And that's unfair trade practices, which has a fairly broad definition.
• 27:47
  And again, we're getting back to regular order or statutes that can be deployed.
• 27:55
  I think, unfortunately, the industries are now set up to challenge many of these in mass because a, we don't like them and they pivoted too quickly to regular order, which, you know, if they'd started with some of these
• 28:11
  things and it was a more gradual deployment without some of the chaos that ensued, you know, we may not be in this position, but, you know, it's water under the bridge now.
• 28:22
  So the administration's in a position where they've got to use the statutes that are available to them.
• 28:29
  And it's a, it's, it's a whole new ball game now.
• 28:35
  Okay.
• 28:36
  All right, so let's talk about Section 122, the midterm math, and then the race to rebuild tariff authority.
• 28:44
  Dan, you go first.
• 28:47
  Well, they, again, as I mentioned earlier, they pivoted to this almost immediately at Trump's press conference.
• 28:53
  You know, 10%, it'll replace all of these.
• 28:56
  And Secretary Bessig came out and said, you know, when I look at the math in terms of our tariff revenue for the year, it's not even going to change.
• 29:02
  I mean, that's how quickly they pivoted to 122.
• 29:05
  There was, you know, we talked about the $8 billion earlier.
• 29:09
  Well, they'll catch up with that eventually, too.
• 29:11
  But you know, when the, when the Treasury Secretary comes out and says we're totally good with this because, you know, we don't think it's going to have any revenue impact at all for the Treasury.
• 29:22
  But the, the, the, the end of 122 officially ends on July 24th.
• 29:28
  It's got 150 day statute and I think it'll be challenged before then, but the courts won't be in a position.
• 29:36
  And I think Jim's point earlier with how long it took the Supreme Court to rule on this one, they're, they're probably, if more comes to them, and I expect some of it will, that timeline is probably going to
• 29:48
  get more elongated than it did with this one because they know it's a hot potato that they really don't want and in some instances they might refuse it outright and kick it back to the lower court.
• 30:00
  So hard to predict.
• 30:02
  But yeah, it's going to be July 24th and they have the ability to extend it, get congressional authorization, but it's a clock right now.
• 30:15
  But one positive aspect of it, it's kind of giving companies what the floor looks like right now and for many things.
• 30:24
  And that's a good situation, especially while the administration is trying to negotiate these bilateral deals and that type of thing.
• 30:34
  And right after the ruling, another important point was there was a couple of groups, the EU and India, and they kind of said, hey, wait, wait a minute, not so fast.
• 30:43
  We, this, this new ruling may be disadvantageous to us because you know, they're, they're like, hey, we're doing a bilateral deal and if the, they were paying 15 and the new thing was 10, they're going to want to
• 30:55
  put that back out for discussion because, hey, I want the 10, I don't want the 15.
• 31:01
  And what's amazing to me now, considering where we were a year ago and, and, and Even before that, 10 or 15% has become the new zero.
• 31:10
  You know, nobody's even batting an eye at that anymore, you know, so tells you how far we've come in the last year.
• 31:18
  All right, Jim.
• 31:20
  Well, July 24th is a legal deadline, but that's when the next lawsuit can begin.
• 31:30
  But much more relevant is it's a political deadline because we got the midterm elections coming up and both the Democrats and the Republicans both want to appear to be tough on China.
• 31:45
  They both want to be very pro worker, they both want to be very anti inflation.
• 31:52
  And so that would say that Congress has pressure on it to try to fix this tariff issue before July 24th.
• 32:02
  That's not going to happen.
• 32:04
  Congress cannot work that quickly.
• 32:06
  That's not within their skill set to get things done, especially with this anti pro Trump thing going on.
• 32:14
  And so I don't think we're going to have tariffs redone.
• 32:19
  And therefore July 24th is when the next set of lawsuits begin and we're going to have the Supreme Court in the exact same position again.
• 32:28
  Is this something that we want to really give a economic business ruling on or do we going to stick to our narrow legal ruling and they're going to be very leery of getting into the economic business side of
• 32:46
  it because that's not what they do.
• 32:48
  And so what we're going to find is that we're going to go into the midterm elections with a lot of confusion and not real clarity on what the tariff policy is going to be.
• 33:00
  If we don't hit that July 24 deadline, what's going to happen.
• 33:04
  That means it's not going to be this Congress that's going to make the decisions, it'll be the Congress after the election.
• 33:11
  And so that got an opportunity to have a drastically different guidelines that the Congress will be setting.
• 33:18
  So we have a mess on our hands and that mess is not going to be cleaned up by the midterm.
• 33:26
  And so we're going to have everyone taking different postures for political reasons.
• 33:30
  Meanwhile, it's affecting US Business and supply chain people in a major way.
• 33:35
  So it's, it's, it's a good time for business and supply chain people to be upset with everyone in Washington because they're not letting us do our job.
• 33:46
  Okay, I would, I would agree.
• 33:48
  And you know, I don't think there's going to be greater clarity between now and July in terms of the consumer impact of this, the inflationary impact of this.
• 34:00
  Joe and I've gone, gone around and around for the month and we were like minded in this.
• 34:05
  It's like we haven't seen it.
• 34:08
  This isn't a set schedule in terms of when tariff related inflationary impact will hit the, hit the US Consumer, if at all.
• 34:17
  And I always tell people, hey, you know, if no one did anything, I would sign up for that.
• 34:23
  But companies are doing things to mitigate it, the government's doing things to mitigate it.
• 34:31
  And you know, there was a large group that thought the inflationary impact would hit hard in the first quarter and heck, we're already into March and it just hasn't really happened.
• 34:46
  But the, the whole question for it appears is lining up for the midterms is the affordability question.
• 34:52
  And, and to, to Jim's point, no one's going to want to go there if they're moving something in the wrong direction.
• 35:00
  That's a new talking point for who they're running against.
• 35:03
  That's kind of, it's not a good, good strategy for an election Year.
• 35:08
  Yeah, I, I think it's interesting because the Democrats really want to talk about guardrails and predictability because we need to have a president that has guardrails and we need to have predictability.
• 35:23
  Well, guess what?
• 35:25
  I agree with him.
• 35:25
  I think guardrails and predictability is a good thing.
• 35:28
  Meanwhile, the Republicans are going to say we need to talk about leverage and negotiation and we need to talk about toughness.
• 35:35
  Well, guess what?
• 35:36
  I agree with them too.
• 35:38
  I want guardrails, predictability, leverage and toughness.
• 35:42
  So it doesn't.
• 35:45
  Their rhetoric is that sad.
• 35:47
  It's rhetoric.
• 35:49
  I think we should do all four of those things.
• 35:51
  Not any two, but all four.
• 35:54
  So, you know, this is a non political podcast and I'm coming out really clearly in favor of the Democrats and in favor of the Republicans.
• 36:03
  There you go.
• 36:04
  They're all confused.
• 36:05
  And so how can I choose?
• 36:06
  Yeah, it's a mess.
• 36:09
  I'm a little more cynical.
• 36:11
  I think the slowdown is so they can get with all their lobbyists and do what they're told.
• 36:18
  I would agree you're more cynical on that one.
• 36:20
  I try not to think about that, but I think you're right.
• 36:23
  I think you're right.
• 36:25
  Okay.
• 36:25
  All right, so let's move through these last couple topics quickly because we're coming up on time.
• 36:30
  So the statute that no one has googled and why that might change this year, which is section 338 and the 1930 weapon.
• 36:39
  Jim, you go first.
• 36:41
  Well, no one has looked into that because it's a 1930s act and it's not something that US practitioners have spent a lot of time thinking about.
• 36:53
  It's more of a lawyer think thing who really knows about 338, in my opinion is more about the trade lawyers.
• 37:04
  But if you talk to executives and journalists and policyholders, they say 330.
• 37:08
  What I mean, it's not something that has been used very often and it's not something that is something that we, quote, need.
• 37:19
  But since EAPA has been thrown out and now with EAPA being gone, we're going to have people looking for other tool kits, other tools that they can use to put forth statues.
• 37:32
  And so I think we're going to have a lot of folks looking into it and trying to figure out what's really happening.
• 37:39
  And I think if Congress could agree on a new tariff framework, we wouldn't have this problem.
• 37:45
  But they're not going to be able to.
• 37:47
  And so suddenly we're going to go back and use a 1930s relic and try to see if we can make it look like it works in 2026 and 2027.
• 37:58
  Yeah, it's, it's never been used at the, the gun has been pointed a few times in the 30s, I think, but it's never been used.
• 38:06
  It's, it's, it's broad based in terms of discrimination against US Commerce.
• 38:13
  So the, the authority is written very broadly.
• 38:16
  And you know, I was thinking the other day, why didn't they use that instead of 122?
• 38:21
  Well, I think they're keeping their powder dry and that's the last arrow in the quiver.
• 38:26
  But it's up to 50%.
• 38:29
  It's broad based discrimination can be anything.
• 38:35
  It can be manipulation of your currency.
• 38:37
  It can be unfair trade practices, it can be VAT taxes.
• 38:42
  Just about anything that happens in global trade could be considered discriminatory against US Commerce.
• 38:51
  And that's one of the reasons why there's folks out there and momentum I think is building that this may be deployed after the July 24 date if they run into any other issue.
• 39:04
  And this one also has some legal foundations behind it.
• 39:08
  There's been rulings over the last 10 years or so where, you know, the rare earth export issue out of China would likely qualify quite neatly with some legal precedent around 338 and the intellectual property theft.
• 39:31
  Those two have already been ruled on and would fall neatly into 338.
• 39:38
  Now that's China specific.
• 39:40
  But Jim and I have often talked too about, well, China's probably going to be on the penalty box for the foreseeable future, maybe forever because they were viewed as a strategic competitor to the United States.
• 39:54
  So what does that look like moving forward?
• 39:59
  But I think there's a strong possibility it will be deployed.
• 40:04
  And Kavanaugh even mentioned it in his dissent, you know, like 338.
• 40:10
  And of course Trump said he's a genius.
• 40:14
  And Besant also said that 338 might be deployed.
• 40:17
  So, you know, they're already thinking about it.
• 40:20
  And the statute is so broad you could apply, you know, commercial implications to almost anything.
• 40:29
  It's very different than ieepa.
• 40:32
  Dan, you're absolutely right.
• 40:34
  It is so broad.
• 40:35
  I mean, you can put a tariff in place for anything that discriminates against U.S.
• 40:41
  commerce.
• 40:43
  Well, I can give a speech that, that includes virtually everything.
• 40:48
  And so if you have a statue that you can literally put everything in that bucket, but no one has ever used it.
• 40:56
  The Supreme Court, I don't think is going to go along with it because they're going to say if it Includes everything.
• 41:01
  It's nothing.
• 41:03
  And therefore it's going to result in another legal dispute.
• 41:07
  A narrow legal interpretation says we cannot prove that this specifically is discriminating against the US because they're charging the same prices to Europe as they are the US and therefore this is discriminating against everyone in the world.
• 41:20
  And blah, blah, blah, blah, blah, blah, blah.
• 41:22
  And here we go again.
• 41:23
  And so I think it's the basic issue we need to go to.
• 41:29
  Who, who do we go to to get these answers?
• 41:33
  And it's not a legal authority.
• 41:35
  It's someone who knows business, someone who knows supply chain well.
• 41:38
  And there's already been one body out there that said, you know, that's just like part of the reason it might be struck down is they're saying you're circumventing the IPA ruling.
• 41:49
  You know, it's, it's not targeted specifically to certain countries if it applies to everyone.
• 41:57
  And that looks like IEA by another name.
• 42:01
  Absolutely.
• 42:03
  Okay.
• 42:03
  All right, so let's boil this down and make it practical for everyone out there.
• 42:07
  What are three things that leaders can do right now, this week, based on everything we've talked about?
• 42:12
  Dan, you first.
• 42:14
  Well, and having lived in the space for several months now, you know, the first thing I would say to anybody is map your exposure.
• 42:23
  You know, what is your.
• 42:24
  What is your.
• 42:26
  And we're moving into a little different period regarding trade and tariffs because tariffs are usually item specific.
• 42:34
  Now we're entering into a country specific mode where the administration is clearly trying to put countries into certain buckets.
• 42:43
  I refer to them as friends and family countries like Japan and South Korea.
• 42:48
  And then you've got trading partners which would, you know, maybe include Mexico and a few other countries.
• 42:55
  And then you have your strategic competitors in the last bucket.
• 42:58
  So I always tell people, map your exposure around the countries and what you're doing in them specifically.
• 43:05
  But then the other thing that I encourage people to do is do an honest self assessment on what you're doing with your tariff mitigation strategies.
• 43:14
  Because if you're, and I feel in particular for small businesses, many of which went out of business last year because they couldn't write the tariff check, cargo was abandoned.
• 43:24
  There was a lot of bad things that happened last year, which is unfortunate.
• 43:30
  But if you're managing your, your tariff plan in a reactive sense and you're heavily leveraged in China, you're in the worst possible position.
• 43:40
  And, you know, Jim and I could talk till the cows come home around near shore as much as you can.
• 43:46
  Have some diversity, friend Shore, near shore, do what you can along those lines, but at the, at the same time, that's all part of this mapping your, your exposure.
• 43:57
  The other thing I tell companies all the time is you better get really good at calculating your landed cost in real time.
• 44:06
  And it's, it's amazing.
• 44:08
  I talked to groups that are sourcing in other countries and they said, Dan, you wouldn't believe these sourcing organizations because they're focused on FOB X factory.
• 44:18
  And they say, oh my gosh, you know, that's 10 or 12% higher than I'm paying now.
• 44:24
  Well, you got to do the whole math.
• 44:25
  You got to do forecast accuracy, what your inventory loads going to look like, what your lead times are going to look like, the whole deal.
• 44:33
  And oftentimes sourcing organizations, and I love them to death because I was one, aren't oftentimes good at doing that math on the fly.
• 44:41
  And they've got to get good at that.
• 44:44
  The other thing as it relates to the refunds is preserve your rights, get your data packets in order, know line by line what you put in and what path you're going to take.
• 44:55
  And then I would say beyond that is the third point.
• 44:58
  I would say begin to do scenario planning.
• 45:02
  Start with a number at the front of the process and a number at the back of the process.
• 45:07
  Each of those scenarios has a number at the front end and the back end.
• 45:11
  You engage your leadership team in terms of if these things happen, here's what we're going to do with our supply chain and you're in a much more comfortable position rather than just sitting back and being a victim to
• 45:23
  whatever happens tomorrow.
• 45:27
  I talk to a lot of companies that haven't done a lot, and in some respects they view that as being disciplined.
• 45:35
  You know, we're waiting until, you know, this episodic thing stops.
• 45:40
  Well, it's not going to stop.
• 45:43
  And I think regardless of your political leanings, you know, once you get a couple of hundred billion into the Treasury, I don't care whether you're Democrat or Republican, nobody's going to give that up easily.
• 45:56
  You know, how do we recreate that number?
• 45:59
  Because we can go spend it on something, you know, and so it's a, it's an interesting, and it's an interesting environment, but I think companies have to just start taking the steps in order to feel good about what
• 46:13
  they're doing.
• 46:15
  And it's, it's going to be a very dynamic environment.
• 46:19
  All right, Jim?
• 46:20
  Yeah, I totally agree.
• 46:22
  Waiting is, is not a strategy.
• 46:24
  The new normal is Disruption.
• 46:27
  We're going to have continuous disruptions taking place in tariffs.
• 46:31
  And I think the approach that Dan outlines about, you know, auditing your tariff exposure and knowing where the dollars are and doing scenario planning is right on.
• 46:40
  Exactly correct.
• 46:41
  I would, when I do that scenario planning, I also would want to look at three broad cases of what might occur.
• 46:49
  I call this World A, B and C.
• 46:52
  World A is where we have significant refunds and lower tariffs.
• 46:57
  I think that doesn't have a snowball's chance of existing, but it's a scenario that you want to have a plan for.
• 47:02
  I think there's World B, which is the status quo, continued disruption, continues uncertainty, and I think that's the reality for the next two to three years.
• 47:12
  And then I think the World Sea is a more targeted tariff regime with Congress getting its act together and putting forth something that's worthwhile.
• 47:23
  I do think that's going to occur, but I think that's going to take two to four years to get there.
• 47:29
  But I do think when we're looking at this, it could happen.
• 47:33
  There could be refunds that we're not expecting.
• 47:36
  There could be the Congress get its act together.
• 47:38
  And if either of those happens, I think we have a different game to play with the refunds and the strategy going forward.
• 47:47
  So plan on World B, but have in the back your mind what you would do if there are significant refunds and if we do get Congress to get off their backside.
• 47:58
  Okay.
• 47:59
  All right, last question.
• 48:00
  Question, we got two minutes left.
• 48:02
  What is one question that the ruling left unanswered that's keeping you up at night?
• 48:08
  Jim, you first.
• 48:10
  Oh, fool.
• 48:10
  I'd hope you'd go with Dan on that one first.
• 48:13
  Well, the one thing I just said it.
• 48:16
  What's Congress going to do?
• 48:18
  Congress needs to do something and stop the politics and get on with what is the approach that we should be taking on tariffs?
• 48:28
  Because the statues we have now and their interpretation really, really are very, very 1920 ish, and we're living in 2026.
• 48:40
  So we need to get on with it.
• 48:42
  Congress needs to get off their backside.
• 48:44
  Dan and I would agree completely.
• 48:49
  I even mentioned this in an article that I had published on LinkedIn months ago saying, boy, they missed an opportunity because they should have dropped more tariff authority into the big beautiful bill and they didn't do it.
• 49:00
  And then shortly after, that's when the lawsuit started and that type of thing.
• 49:04
  Now it's still not a, it's still a heavy lift in order to give the administration more tariff authority beyond what's already on the books.
• 49:12
  But I'm right with Jim on the congressional question.
• 49:16
  Okay.
• 49:17
  All right.
• 49:18
  Well, we covered a lot in this last hour.
• 49:21
  So much for companies to be mindful of and to, you know, actions to take as you've outlend.
• 49:27
  So, Jim Tompkins, Dan Krause, thank you so much for your valuable insights on this topic that we're able to share with everyone.
• 49:34
  Thank you.
• 49:36
  I enjoyed it.
• 49:36
  Thanks for having us.
• 49:38
  Thanks, Dave.
• 49:38
  And thanks, Dan.
• 49:39
  It was fun.
• 49:40
  Thank you.