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From the New York Times' DealBook, September 4:
Investors are offering to buy importers’ rights to any refunds of the administration’s levies. It’s a longshot wager that courts will overturn the tariffs.
Andrew here. There’s a fascinating new conversation happening among C.E.O.s and Wall Street firms: Some of the biggest American companies getting hit by President Trump’s tariffs are being pitched to sell their rights to a refund, which would be especially lucrative if the Supreme Court ultimately decides to reverse the levies.
Financiers are offering to buy the refund rights for cents on the dollar — and, given the costs and uncertainty of the legal fights in challenging the tariffs, many companies are considering those proposals. My colleague Bernhard Warner has a detailed breakdown. What do you think? Would you sell your refund rights up front now in exchange for cash? Let us know.
The tariff refund trade
President Trump on Wednesday sought to defend his expansive trade war by appealing to the Supreme Court.But that hasn’t deterred Wall Street firms from a buzzy — if perhaps long-shot — trade that effectively bets against the survival of his tariffs.
The transaction revolves around tariff refund rights. Companies can challenge what they pay in import duties if they believe that the levies were unlawful. That means importers could collect windfalls if the Supreme Court upholds lower court decisions that most of the tariffs are unconstitutional. (How big? The government collected nearly $30 billion in July alone.)
Importers could also seek refunds if they think that they were erroneously charged.
Financial firms have made a proposition to importers: They would buy companies’ legal claims over refund rights.
“We have a lot of clients asking about it,” Lenny Feldman, a managing partner of Sandler, Travis & Rosenberg, a law firm specializing in international trade, told DealBook. (His firm is not involved in such transactions.)
For importers, selling refund rights is a potential way to cushion tariff losses, even if some offers have been valued at pennies on the dollar. DealBook hears that large U.S. companies are among those weighing such proposals.
The trade gained attention in July, when Wired reported that it had seen a pitch letter from Cantor Fitzgerald, the Wall Street brokerage once led by Commerce Secretary Howard Lutnick, and is now helmed by Brandon Lutnick, one of his sons. Cantor was willing to buy the rights to a company’s claim and pay 20 to 30 percent of whatever it recovered, according to Wired.
That caught the attention of Democratic lawmakers. Senators Elizabeth Warren of Massachusetts and Ron Wyden of Oregon sent a letter to Cantor, seeking more detail and saying that Congress had “a strong interest in oversight of these reported deals.”
Erica Chase, a Cantor spokeswoman, declined to comment, but pointed DealBook to a Bloomberg report last month in which she was quoted as saying, “We have not facilitated or executed any trades in that market....
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