Almost every article on today’s tariff decision includes, somewhere two or three paragraphs down, a note which explains that it’s unclear how or whether the federal government will issue refunds for illegally collected tariffs. The Court’s decision doesn’t address this. I’m not sure why it really need to address this. The tariffs were illegal. The government had no legal authority to collect them. So it should be a simple matter for importers to go to court and compel the government to refund their money. But set all that aside. Is it really so uncertain? I’ll bet the White House is going to find a way to issue those refunds. Why? Because Trump insiders, especially the family of Commerce Secretary Howard Lutnick, made huge, huge bets on the tariffs being tossed. They and their clients now stand to make tens or even hundreds of billions on those refunds. Given that Lutnick is a primary player in White House tariff policy, I’m pretty confident that they’re going to find a way to issue those refunds.
How does this work? I discussed this in a post from Sept. 1 of last year. The gist is this: When he became commerce secretary, Lutnick gifted his sons his Wall Street firm Cantor Fitzgerald. (In the link above I explained how they structured this handoff — which as a bonus allowed Lutnick to pay zero capital gains on the entire transaction.) Twenty-something failson Brandon Lutnick is now chairman of the firm. Brother Kyle, apparently another business prodigy from the same family, is vice chairman. Soon after Trump’s tariffs were announced last, fall Brandon Lutnick — no doubt in a totally, totally arms-length way — started buying up the rights to tariff refunds at about 25% of their sticker value.
To understand how this works, think of it like this. Corporation X pays $100 in tariffs to the federal treasury. Brandon offers them $25 for the right to collect any refund they might eventually be entitled to if the tariffs are rejected by SCOTUS. If the tariffs are overruled every quarter Brandon bet becomes a dollar.
By mid-summer that percentage was getting closer to 30% and one imagines that the percentage went up a lot after an appellate court ruled the tariffs were illegal. It’s not clear just how many refund rights the Lutnick boys bought up. But last July, Cantor Fitzgerald said it had “the capacity to buy the rights to hundreds of millions of dollars.” In other words, the payoff on these bets could be astronomical.
Keep an eye on this. There are crazy sums at stake.
