U.S. President Donald Trump‘s unprecedented global reciprocal tariff policy under the International Emergency Economic Powers Act (IEEPA), now deemed illegal by the U.S. Supreme Court, has raised a lot of uncertainty in the sector.
That uncertainty ranges from what happens to reciprocal trade deals to how much higher new duties might climb and even how do shoe importers get their refunds for illegal tariffs already paid.
Globally, some trading partners who inked reciprocal trade deals with the U.S. are hitting the “pause” button as they ponder the Supreme Court’s decision ruling the IEEPA tariffs illegal, which served as the primary underlying basis for those agreements. Two opposing examples are the European Union seeking clarity on Trump’s trade policy before proceeding to ratify the agreement and Switzerland’s move to ratify its reciprocal trade deal with the U.S. in hopes of keeping the tariff rate on the agreed upon 15 percent instead of running the risk that new duties go higher.
Neither appears to be the ideal solution even as U.S. Trade Representative Ambassador Jamieson Greer told CBS News on Sunday that “We’re going to stand by them. We expect our partners to stand by them.”
Footwear Distributors and Retailers Association (FDRA) president and chief executive officer Matt Priest described the current situation as “unchartered waters.”
“I know Ambassador Greer said publicly that they’re going to honor the agreements, but they don’t have legal authority to implement the tariffs that are part of the agreements on reciprocal trade. And because those are all under IEEPA, that’s gone,” Priest said.
The confusion over U.S. trade policy continues to build for several reasons. The IEEPA tariffs expired as of midnight Tuesday. The 10 percent tariff based on Section 122 of the 1974 Trade Act that was expanded to 15 percent on Saturday was set to begin Tuesday at 12:01 a.m. for 150 days through July 24. But the global tariffs that were imposed were at 10 percent, with no explanation as to why the lower rate had been used. However, the executive order signed by Trump on Friday was at the temporary 10 percent rate, and there was no language that indicated a future rate increase. And there are rumblings that the newly-imposed Section 122 tariffs could be illegal too. That’s because that section was meant to address a significant “balance of payments” deficit and not for any trade deficits.
Now all eyes will be focused on Trump’s State of the Union address Tuesday night, where it is hoped that he would provide further clarity on trade policy.
Priest said there’s been some talk and concern over whether Trump could pull the tariff with a few days to go and then restore it, restarting the clock for another 150 days. “We’ll see if that happens. I’ve seen commentary that says there’s not really a prohibition in the language of the law that says President Trump can’t do that,” the FDRA CEO said, adding that there are probably other considerations regarding creative ideas on how the administration can maintain the same negotiation leverage using tariff strategies cobbling together from different statutory options.
“Obviously [the FDRA] opposes all of this, but we have to prepare ourselves for the fact that we [could] have a 15 percent rate in place beyond July 24,” Priest said.
Also of concern for shoe importers is the procedure for getting their refunds. On Monday, 22 U.S. Senate Democrats introduced legislation that would require a full refund by the Trump administration within 180 days of all funds owed that was paid via the struck-down duties, plus interest. Based on most recent data from the U.S. government, about $130 billion in tariffs had been collected under IEEPA.
Karla Cure, a customs law attorney at K&L Gates in Washington, D.C., said during a law firm webinar on Monday importers will have to wait for further guidance from the Court of International Trade (CIT) and from U.S. Customs and Border Protection (CBP). She also suggested that as a possibility there could be one process “for the parties who submitted a case before the CIT and you could have an administrative process for those parties who did not file a case with the CBP.”
She also noted that for importers to be in a better position to quantify any claims to IEEPA duties to enroll in the CBP refund program. “As of February of this year, CBP is not going to issue refunds through checks. It’s going to refund any money to the accounts that you have registered with CBP in the CBP refund program,” Cure said, adding that once an account is registered to make sure to provide the bank account information that will receive those refunds.
Nate Bolin, a trade and national security attorney at K&L Gates, emphasized that the process will come out of lower court proceedings at the CIT. “U.S. law imposes a duty on all importers that they are required to keep accurate records and complete records,” he said, noting that the process likely may not be instantaneous “given the magnitude” and number of claims involved and that “we may even be looking at the refunds playing out over several years or more.”
