Today's number, 428. That's how many miles FBI Director Kash Patel traveled to watch the hockey final at the Winter Olympics last week. Mr. Patel drew criticism after he was seen chugging beers in the locker room. But to be fair to him, the best thing after a long week of protecting pedophiles is an ice cold beer.
Welcome to Prof G Markets. I'm Ed Elson. It is February 24th. Let's check in on yesterday's market vitals. The major indices fell after tariff uncertainty resurfaced. Renewed AI jitters also rattled investors. Software companies were hit especially hard after a viral post from Citrini Research reignited concerns about AI's impact on the economy. Meanwhile, Bitcoin continued to slide and gold and silver both rose. Okay, what else is happening?
For a fleeting moment, it looked like the courts had put an end to Trump's tariffs. In a 6-3 ruling on Friday, the Supreme Court decided that Trump can't use emergency powers to impose sweeping tariffs. Stocks and Treasury yields rose on the news. Trump then called the decision, quote, "ridiculously and extraordinarily anti-American." And then he moved to Plan B. Within hours of the ruling, he announced a blanket 10% tariff on all imports. And then he said he'd bump it up to 15% on Saturday. This time he's leaning on Section 122 of the Trade Act of 1974, which gives the president authority to restrict imports for up to 150 days. Stocks gave back their gains on Monday as investors digested the whiplash. So many important questions remain. What exactly has changed here? What will happen with tariff refunds? Will consumers and small businesses get any relief? Lots of questions. Here to help us answer some of these, we have a panel of experts. Today, we've got Peter Harrell, visiting scholar at the Institute of International Economic Law at Georgetown Law School, and also Ryan Petersen, CEO of Flexport. Peter, Ryan, thank you very much for joining us on Prof G Markets. Peter, we will start with you. A lot has happened over the past three days. Give us your initial reactions to the Supreme Court's ruling and also Trump's reaction to the ruling.
Yeah, so we got the Supreme Court decision on Friday. I don't think the Supreme Court decision really came as a surprise for those of us who had listened to the Supreme Court hearing back in November. It seemed like a majority of the justices were skeptical of Trump using this 1970s-era emergency powers law for his tariffs. So, not really a surprise there. You could also tell the administration wasn't really surprised because while Trump obviously denounced the Supreme Court with his characteristic bravado, the administration was also quite ready to go with their backup plans. As you alluded to, within hours of the Supreme Court ruling, Trump had signed a proclamation using this other statute also from the 1970s to impose a 10% tariff. He said on Saturday that he would increase that to 15%, although as of Monday afternoon, he's not done so. So, I do think we have to see if he in fact increases it to 15%. It probably will, but we haven't actually seen that yet. That action, what's called a 122 action, will keep this either 10 or 15% tariff in place through late July. He can't use that statute for more than 150 days. And so the other thing we're seeing is the administration begin to spin the wheels on some still other tariff laws that could keep tariffs in place once the 122 action expires in late July.
So, you mentioned there he puts the 10% tariff in place. That's happened. Then he says we're going to go to 15%, but that hasn't quite happened. Maybe it will have happened by the time this airs. Ryan, I was looking at your X account. You actually predicted that he would bump it up to 15% before he said he was going to do that. You said that he's got it at 10%. And then you said, I predict that he's going to move it up to 15%. You also made another prediction that we'll get to. Why did you say that? And do you think it will still happen?
15% is the maximum of what he can do. And so you figure he has it in the back pocket. Left himself a little cushion to add some more later. And I wasn't expecting him to pull the trigger as fast as he did. I thought he'd wait a week. Until my prediction, I said, oh, you know, Canada's going to do something to piss him off and then he's going to do it. But it turned out America beat Canada in the hockey game. I thought that would be the funniest thing that could happen is if Canada beat us and then he said, all right, here's some more tariffs for you. But I didn't mean to do that.
The other prediction you said you wrote, quote, "150 days from now the tariffs will be paused for 15 minutes and then immediately reinstated for another 150 days." And this goes back to what Peter was mentioning here, that there is this 150-day time frame and that's what's legal. You say he's just going to cancel and renew. Take us through that.
I'd like to hear Peter's take on that and other people too. I'm not a lawyer and, you know, there's nothing explicitly in the law that says you can't extend it beyond 150 without Congress's approval. But if you left it expired, you let it expire and then put a new one in, surely it would get challenged. It might lose the case, but he could do it. I don't know. What do you think, Peter?
Yeah. So, I think, I mean, there's one question about how do I think the courts are going to interpret the law, which is not really the question of what Trump will do, right? Because Trump's going to do what Trump's going to do. Well, I actually feel pretty confident that if Trump tries this strategy of 150 days, expires for 15 minutes, another 150 days, the courts will throw that out. Now, it might take them a couple of months to throw that out. So, Trump might, you know, get another couple of months before the courts throw it out. But I think the courts would throw that out. It's kind of an interesting thing here of like, you know, even with IEEPA, even if you knew it was going to get thrown out and you knew you'd lose the Supreme Court case on Friday, he still got quite a lot of leverage from putting it in. I mean, you got all kinds of countries to come and make a trade deal with him. Most of those countries are not going to undo the duties that they dropped their tariff rates or lowered other barriers and they're probably not going to just turn around right now and drop it. It's sort of interesting to think of like what are the rewards that Trump gets even from effectively what he did was break the law. It's interesting to think about.
Well, what do you think this does mean for other countries, Peter, in terms of, I mean, they came up with these sort of semi-deals. They're more kind of spoken-word agreements and then everyone puts their tariffs in place. If you're a foreign government, if you're say Brazil or you're China or the UK or whatever, do you react to this news? Do you decide, okay, I guess we're taking the tariffs down, or do you react to the 10% or the 15%? Like, what does this mean if you're a foreign government?
Well, the first thing I would say, and I said this last year, that in 2025, the biggest true winners of Trump's trade war are the trade lawyers. I think it is going to be true in 2026 as well that the trade lawyers will be the, you know, one true class of winners. And so I think what you're seeing right now is the foreign governments are talking to a bunch of very expensive trade lawyers to try to understand what's going on and what they should do to game this out. Look, I think the question in some sense is in Trump's court in the following way. I think that if you are Europe or you are Japan or you are one of these other countries that has a trade deal, if it looks like Trump is going to keep your tariff rate at the rate that was agreed to or lower, right? If you'd agreed to a 15% rate, if it's going to be a 15% rate or lower, I think you keep honoring the deal, right? Because you don't want to piss Trump off. He might sanction you. He might, you know, who knows what he's going to do, right? So, I think you keep honoring it.
He has these other levers. He could put national, he could put Section 232, Section 301, he has other things he can go do.
Totally. So I think you stick to it. Now if what Trump does is use this as an opportunity to somehow hike rates, like if you were at a deal, if you're the UK and you have a 10% rate in your deal and he's now hiking that to 15, I think that becomes a little more complicated a question for you. But if Trump plans to keep the rates the same, I think most countries will basically continue along.
Ryan, you kind of have the most direct line of communication with the businesses that are dealing with this because you're operating the logistics as they trade goods around the world. What are businesses and companies doing about this, if anything? In the same way that maybe there's a question for foreign governments, do we react? Are you finding that companies are reacting to this news?
Well, it's a bit of a popping of champagne that's happening right now as people are expecting to get refunds. I expect to get refunds. A lot of the trade attorneys and advisory folks are a little bit hesitant to just say something. I don't know. Lawyers don't like... Yeah, you're going to get a refund. It might take you a couple of months, but you're going to get a refund here, right? He's on my side. That's obvious. You just read the motion that DOJ filed in the appellate court and it's just like, we will give refunds if we lose this case. You're like, "Okay, great. Now you're going to give refunds." Trump says they're going to fight it. It's going to get litigated. Surely that's true, but like, they got to lose the case. It seems like a slam dunk.
How does the refund process actually work?
Right. So, there's a fair amount of uncertainty there. What we do know is under the customs regs, you basically have a maximum of 494 days after a customs entry is filed to do what's called file a protest. And you do it once and that's the maximum. It could actually be less. So, you want to get these things filed sooner than that. And so you're going to have to go back and file protests on all the entries that you did that had IEEPA tariffs. And so, actually the first IEEPA tariffs didn't come out on Liberation Day. They came out on February 4th of last year with fentanyl tariffs on China, Mexico, Canada around, I think February 4th is the 1st. I forget the exact timing of those three different things. But so your clock is kind of like maximum of 494, but honestly you're pushing it close to the edge and you don't want to get past that date. If you get past that date, it's too late to file a protest. And at that point, you actually have to file a lawsuit to undo the IEEPA tariffs and lawsuits are very expensive. Protests are pretty cheap. Flexport and others can just file a protest for you. That's what we're doing with our customers right now is now that this is now a thing that they've been overturned. We've been ruled illegal. We're going through with all of our customer base and filing protests for all of their IEEPA entries going back to February 4th of last year. And then we've also created a process on our website at tariffs.flexport.com. At the top you see refund. Currently it says refund calculator because that's what it said as of Friday. I'm trying to get your team to update it. Just refund, you know, claim your refund or something. But that's what that is, is we're bringing people in, first of all, calculating the dollar amount of how much is potentially owed. I think likely owed. Very high probability. And then getting you enrolled in a program where we'll go file those protests for you. What we don't know yet is, is filing a protest enough? If I file a protest and you acknowledge it as CBP, do you now send me a check or is there some other mechanism? And we won't know that until it gets litigated and they lose, I think. And then customs will provide some clarity for what comes next. But for sure, we know you got to go get your protests in if you've got any entries. And if you're only going to take one thing away if you're a business out there is file your protests. And if you want an easy way to do it, call me.
It sounds like you both strongly agree that refunds are coming.
I was just, I mean, think about it this way. There's nothing magic about tariffs that make them different from any other tax, right? If President AOC had declared, we're all paying 70% income taxes now and the court said, "No, there's no 70% income tax." Of course, we'd all be saying, you know, we get our money back, right? It just would be obvious to everybody. And the US government actually, you know, it processes on the different agency, but on the tax, you know, on the income tax, they do 120 million refunds a year, right? It's not like the government doesn't do tax refunds. It's not like the tariffs are some magical thing the government can just keep when they're illegal. They're like any other tax. So, I do think the point, and I very much agree with Ryan, the government can make this hard, right? They could try to not issue refunds just as companies are filing protests. They could try to require everybody to come in to sue. Like, they could make this administratively hard. But at the end of the day, whether the government goes the easy way or the hard way, the money is going to be ordered to be turned back over.
Yes. And by the way, the government prepared itself. So we, Flexport, has gotten over $700 million worth of customs refunds for our customers in the last five years. To Peter's point, it's like a very normal thing. It's very, you know, this is a normal thing. You file a protest, you get your money back. The government has been sending those as paper checks from the Treasury Department for the last five years, and they get lost in the mail all the freaking time, and they get cashed by scammers. It's a nightmare. Well, about two months ago, maybe in anticipation of Friday's ruling, they updated their process to say all refunds will now be done electronically through a, if you want to. It was like auspicious. We're all looking at this going, "Huh, why are they suddenly getting their house in order and how they're going to process refunds in a more automated fashion?"
