A quick look at the tariff landscape, refunds and managing cash flow in times of rapid change.

Tariffs are on. They’re off. And on again. Are they really? It’s tough to keep up with the changing headlines. Here’s a quick look at what’s happened since the Supreme Court ruled President Trump’s tariffs unconstitutional in February.

The Supreme Court decision

In a 6-3 decision, the Supreme Court upheld a lower court ruling that found the president exceeded the authority granted by the International Emergency Economic Powers Act when he imposed tariffs on trading partners. The IEEPA doesn’t authorize the use of tariffs. Additionally, the authority to tax belongs to the U.S. Congress, not the president, according to the Constitution. The ruling came in response to multiple suits filed by the owners of several small businesses and a group of states affected by the increased tariffs.

Will the tariffs be refunded?

A big question now is how and when the unauthorized tariffs will be refunded. The court said the money must be returned but didn’t issue guidance on the logistics. It doesn’t appear that the process will be swift. Reuters reports, “The case will now go back to the Court of International Trade to sort through the refunds.”

Many observers say it will take years of litigation for businesses to reclaim their portion of the $175 billion collected for tariffs. Litigation is already underway. More than 1,000 importers with deep pockets—like FedEx, L’Oreal, Costco and Goodyear Tires—have already filed suits to get a refund.

If lawsuits are the only way to get a refund, many smaller importers fear they’ll miss out because legal and court fees could be prohibitive. These small business owners note that the government has electronic records for all tariffs payments and are calling for automatic refunds.

Short-lived relief?

Immediately after the court’s decision, the president announced that he would impose a new round of 10% tariffs on all countries under Section 122 of the Trade Act of 1974. The next day he upped the tariff figure to 15%. Any tariffs imposed under the Trade Act expire after 150 days unless extended by Congress.

Many say the present trade situation does not meet the criteria for imposing tariffs under the Trade Act.

“Indeed, the president’s own lawyers argued in the IEEPA case that Section 122 was no substitute for IEEPA, since balance of payment deficits are conceptually distinct from the current account and trade deficits that Trump has characterized as an emergency,” says an analysis from the Peterson Institute for International Economics. This conclusion is echoed in a Wall Street Journal commentary that says Section 122 applies to a problem that has become obsolete and cannot be used to justify the new 15% tariffs.

Managing cash flow in the face of rapid change

Tariffs raise the cost of doing business while rapid changes in trade policy make hiring and pricing decisions difficult. One way to smooth out the financial bumps in the road is with a business line of credit that allows you to borrow, pay back and re-borrow funds as needed. To learn more, contact our Business Development Team.

 

All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications, and collateral conditions.