Why Donald Trump is refunding $160 billion — Global News Podcast

[0:00] Welcome to the Global News Podcast from the BBC. Hello, I'm Ankur Desai and today alongside me [0:05] I've got Daniel Bush, our correspondent from Washington. Daniel, how's it going? Busy day [0:09] for you so far? Always busy, Ankur. I'm sure for you too. I found this particular story we're [0:13] going to discuss today quite interesting because so much of the focus at the moment in Washington [0:17] I can imagine on Iran, the Middle East, and the conflict that is unfolding on a day-to-day basis. [0:23] However, a story which has flown under the radar a little bit are the tariffs that Donald Trump's [0:28] administration are going to have to refund. That's right. So I'm so glad that we're [0:33] shining a spotlight on this story because you're right. So much attention here in Washington is [0:38] focused on the war with Iran. But this is a very big deal. This has enormous implications for the [0:44] U.S. economy, for the global economy, for President Trump's second term, for the fight, the power [0:50] struggle between the branches of government here in the U.S. So there's a lot to dig into. [0:54] Just a quick, broad overview. If we think back to last year when Trump famously appeared in the [1:00] Rose Garden with that big poster board that everyone remembers with the tariffs for each [1:04] country, those were his so-called global tariffs. And he put these sweeping tariffs into place on all [1:10] imported goods to the United States from all countries, everywhere in the world, but different [1:14] levels for different nations, you know, different for China, for India, for Canada, with some of the [1:19] United States' longest standing trading partners. They were all hit with tariffs. It caused a huge [1:24] uproar. You know, we remember that period in March, April, May of last year where, you know, [1:30] the tariffs were on, they were off. They were, he would move them up. He would threaten to move them [1:33] down. But they went into effect. I mean, that's the long and the short run, right? They went into [1:38] effect and the U.S. government began collecting duties, taxes on imported goods. And the Supreme Court [1:44] just ruled a little while ago this year. The power in the United States to levy tariffs, to levy taxes [1:50] and imports rests with Congress, not with the executive branch, not with the president. And so [1:55] it ordered Trump to undo those tariffs, number one, and also as a result to pay them back. So that's [2:01] where we stand. And just this week for the first time, the administration has begun the process of [2:06] figuring out how to pay back what the Supreme Court has said was illegally taken taxes to the tune of [2:12] 166 or so billion dollars. I mean, that's incredible amount of money. Sorry, that's [2:18] incredible. 166 billion dollars. It's not like you can just suddenly turn up with the receipt and say, [2:23] hi, I'd like 166 billion dollars transferred into an account. And then that sort of gets sent off to [2:28] different people who are owed different sums of money. How does that even begin to process? [2:33] That's right. I mean, this is a logistical headache for the administration, but also for companies. I [2:38] mean, let's remember, these are these are companies ranging from huge multinational corporations to [2:43] small mom and pop shops, as we call them here in the U.S. that may have imported, you know, goods to [2:48] manufacture, you know, a small hardware product, a, you know, cloth for T-shirts, any good. [2:58] It could be a local bike shop getting some products in from, I don't know, South Korea, [3:01] Japan, but you could also be looking at a big global company like Costco or FedEx, right? [3:07] Correct. Everything from, you know, a box that with nuts and bolts, literal nuts and bolts that [3:12] was shipped to a small business owner to a shipping container containing thousands of components that, [3:18] you know, a big multinational corporation imported to the United States. So all of these companies now [3:23] have an opportunity to get back the money that they paid. So let's let's think about how that's [3:28] going to work. And I've been speaking with trade experts ahead of this to understand the process [3:32] better. So over 330,000 importers paid these, these tariffs that the Supreme court struck down [3:40] over 330,000 of those only 17% so far are enrolled and deemed eligible by the government to get the [3:50] refunds. So you might say, well, 70% is that's a low number, but they actually account for 82% of all [3:57] the taxes that were collected. So some 127 billion of that $166 billion total is from a small group of [4:06] businesses. And I'm told those are the big companies, you know, your, your major corporations [4:10] who are constantly importing goods from abroad, they account for the vast majority of the taxes. [4:15] And they're now in the process of trying to get those back from customs and border patrol, [4:20] the agency that was responsible for collecting the taxes in the first place. It's a complicated [4:26] process encore for how you do that. You know, I've been told it's not just simply a matter of, [4:31] you know, a small business owner or, you know, a big company just sort of sitting down in front of [4:35] a computer and spending a couple of hours filling out forms. Right. And because it's so complicated [4:40] and because it, you know, in certain circumstances, you have to hire attorneys to work through your [4:44] seats and so on. It may turn out that it's simply not worth it for these small businesses that are being [4:50] left behind. Okay. So, so naturally a lot of companies, well, they will have to pay more in [4:55] tariffs. They have been paying a lot more in tariffs and they've then had to pass on this cost [4:59] to consumers, customers, American citizens. Are they going to see any of that money back? The, [5:04] the, the U S treasury have said no. Right. I mean, that's, that's the big question. [5:08] We've been talking about companies, right? So now let's, let's shift a little bit and talk [5:11] on the consumer end. Um, first off, we know that since these tariffs have gotten into effect, [5:16] that cost has been passed to consumers, right? President Trump last year said, you know, [5:21] these tariffs are going to make America strong again. They're going to, um, you know, end an [5:25] era of companies cheating the U S uh, they're going to re help rebuild the economy. And I mean, [5:30] this, these tariffs were a core part of his platform, his economic platform. And he has argued [5:35] all along that is not going to hit consumers is not going to hurt, you know, average everyday [5:40] Americans paying for groceries, paying for, um, gas, paying for, you know, hardware to, [5:46] to renovate a home and so on. Um, but in fact, that's exactly what happened, right? So [5:50] as these tariffs went to effect, the price of goods went up. And now the question is, [5:55] will that continue? And honestly, I think it's just a little too early to say, because [5:58] before companies decide whether or not to continue to pass on those high costs, they needed to see [6:04] first what their refunds are going to be. Right. So maybe that in some cases, companies will decide, [6:09] well, you know, we got back all of our refunds, maybe we'll lower prices a little bit to try and be [6:14] competitive in the marketplace. But probably what I'm told by trade experts is that often [6:19] doesn't happen. Once companies raise, raise prices, they usually don't turn around and say, [6:23] we'd actually like a smaller profit margins. But Americans are beginning to become aware of the [6:29] fact that companies are getting back a very large amount of money. I mean, over a hundred billion [6:33] dollars. But Danny, where's that money going to come from? I guess a lot of people wondering, [6:37] where is 166 billion going to come from? Um, the white house is big, but they don't have sofas where [6:42] they have that much change down the back of them, right? That's exactly right. It's not as if the [6:46] government has 166 billion dollars sort of in the couch cushions. But, you know, broadly speaking, [6:51] this this tariff is a tax. You know, President Trump has not called it that, but that's what it is [6:57] in effect. That tax goes gets lumped in with income tax, with corporate tax, and it all sits with [7:03] the Treasury. So the government has this money. The question that trade experts are trying to [7:09] understand now is, did the Trump administration set this money aside that the tariff revenue they [7:14] collected in case they would have to pay it back? Or has some of it already been spent? So that's [7:19] the question that we don't really have an answer to yet, right? Is there just 166 billion dollars [7:24] on the side waiting to see what happens? Or will the government have to draw from other pots of money [7:30] to cover these refunds? Okay, politically, how does this play out for Donald Trump? He's dealing with a [7:34] war on the other side of the world. He's got some midterms coming up later this year. How is this [7:38] going to affect him as the year progresses? Well, this has been a big political blow, [7:44] a big defeat for him. There's no question about it. There's no other way to put it. You know, [7:48] as I said earlier, right? I mean, tariffs were one of the two or three biggest promises he made on the [7:52] campaign trail. Now, when he was running for reelection, that he would put in place this broad, [7:57] sweeping, unprecedented tariff system that was going to transform the global economy and put the U.S. [8:02] on an even footing with its rivals and trade partners and so on. That is now partly out the [8:08] window. The Supreme Court ruling struck that down. The administration has kept some tariffs in place, [8:13] but they've had to make them more narrow to comply with the law. So he lost the ability on the one hand [8:18] to put this broad tariff system in place. And then on the other hand, now, you know, sort of adding [8:23] insult to injury, if you will, has to pay back all of this money. So it just complicates President [8:28] Trump's case. And of course, he's not on the ballot in November, but by extension, it complicates [8:32] the case for Republicans to make to voters to say, hey, you know, two years in, a year and a half [8:37] into Trump's second term, you know, we are strong stewards of the economy because a central part of [8:42] their economic message has now undercut or pulled out from under them. [8:47] Have these tariffs made life better for Americans or worse? He talked about Liberation Days, you [8:51] mentioned. He talked about winning, winning, winning, winning, winning. Are Americans winning? [8:55] The short answer in the last year probably is no, right? Because from the cost of TVs to wood at [9:02] the lumber store to grocery stores to clothing and so on, costs have gone up in general. And Trump [9:09] promised to lower inflation from the Biden years. Inflation has roughly stayed the same. It hasn't [9:14] gotten appreciably down. As we've talked about, you know, companies pass those costs on to consumers [9:20] that probably won't go away. So in the short term, the answer is no. Had these tariffs stayed in [9:25] place? Had the Supreme Court not struck them down? You know, then we'd be talking about a sort of [9:29] several year process to see how would it have actually impacted the economy in the long run. [9:33] The Trump administration has argued that that in the long run, this will be better for the U.S. [9:38] We're not going to know that answer because those tariffs are out the window. And so the short term [9:43] answer is this has been a cost, a burden for consumers. And we know from public polling that these [9:49] tariffs have not been popular. So that's sort of the answer from the public on one of Trump's core [9:54] economic issues. Thank you so much for your time, Daniel. That's Daniel Bush, our Washington [9:57] correspondent. And do click on the link below if you want more from the Global News podcast. [10:03] Thank you so much for your company. We'll see you on the next one.