Making Sense of the Tariff Mess with Marc Busch from Georgetown University

Unless you’ve been living under a rock for the better part of the last year, you know tariffs implemented by the Trump administration have wreaked havoc on global trade. And now that the US Supreme Court declared a large swath of those tariffs illegal, I've invited an expert onto this show to help make sense of this tariff mess. Marc Busch is a professor at Georgetown University’s School of Foreign Service and he joins the show to share his insights on what to expect as the story of Trump’s tariffs continues to evolve. 

Marc is also a co-founder at TariffWizard, which has launched a new tool that helps importers and other businesses navigate tariff codes. Marc's dynamic way of describing the complexity of tariffs -- including examples that cite X-Men action figures and Snuggies -- helps explain the maze of details companies are facing as they try to make heads or tails of tariff policy. 

Episode highlights

• Marc's reaction to the Supreme Court decision - (2:17)
• How businesses have responded to tariffs - (4:39)
• Details about TariffWizard - (7:33)
• How TariffWizard is helping businesses save money - (10:54)
• X Men and Snuggies navigate tariff codes - (19:56)
• Will tariff refunds actually happen? - (22:52)

Transcript

(Note: This trasncript was created using AI. It has not been edited verbatim.)

Sean McMahon  00:00

Hello everyone, and welcome to the Modern Money SmartPod. I'm your host, Sean McMahon, and unless you've been living under a rock for the better part of the last year, you know that tariffs implemented by the Trump administration have wreaked havoc on the landscape for global trade, and now that the US Supreme Court declared a large swath of those tariffs illegal, I decided to invite an expert onto this show to help make sense of the tariff mess. 

Marc Busch is a professor at Georgetown University's School of Foreign Service, and he's going to join me in a minute to share his insights on what to expect as the story of Trump's tariffs continues to evolve. Marc is also going to share the details of a new tool called TariffWizard that helps importers and other business owners navigate the complexity of tariff codes. I'm no tariff expert, but I must admit that TariffWizard sounds pretty cool, and it seems especially useful for companies that are trying to make heads or tails of all this tariff volatility. 

But before we hear from Marc, just a couple quick reminders. First, the calendar is turned to March. So that means I'm going to be making my annual road trip to Boca, Raton, Florida for the futures industry Association's Global Cleared Markets Conference. This marks the fifth year in a row that we've taken this show to Boca. So watch this feed of the next week as we post multiple episodes per day featuring insights from industry leaders as they gather to discuss key issues related to derivatives markets, including 24/7 trading prediction markets and yes, tariffs. 

And finally, just a quick reminder that if you like this show, please share it with your friends and colleagues and be sure to follow us on Apple, Spotify, YouTube or wherever you get your podcasts right now, let's get things rolling with Marc Busch from Georgetown University and TariffWizard. Marc, how you doing today?

Marc Busch  02:14

How are you.

Sean McMahon  02:17

I'm fantastic It's we're recording this. I should note this we're recording on, you know, March 3, at about two o'clock Eastern. And I say that because the the topic we're about to cover, definitely, things move pretty fast, so who knows what might be announced later today. So it's tariff Tuesday, and I'm happy to talk to you, because you are an expert on tariffs. So let's start by just talking about what was your overall reaction when the Supreme Court first announced its decision that declared illegal this large swath of tariffs that the Trump administration had implemented,

Marc Busch  02:49

Relief. Certainly had always expected the Supreme Court to strike down the tariffs that Trump issued on everyone, on everything under the International Emergency Economic Powers Act, and I had always bet that it would be a seven two verdict. I'll take the six three. I was hearing smart people worried that it might go five four, and might even go in the opposite direction, five four. So at the end of the day, not just for the sake of trade, but also for the sake of separation of powers, it was a tremendously consequential decision. And the ruling itself was really interesting, because while you had the majority at six three, what was striking about the opinion was how everyone got to the majority view on the IEEPA tariffs, namely the Roberts Court, which has had a fascination with the major questions doctrine, and this certainly fell under those terms. Like to rehearse some of the underlying reasoning behind thinking about the IEEPA tariffs in that context, three of the six, more or less said we don't need anything other than common sense to arrive at the verdict that these terrorists are completely 100% illegal, and we're going to get there in the Most straight possible May, straight possible way, which is ruling with common sense. So for 170 page document, what is kind of an indicator as to the obvious nature of the outcome was most of the language was spent on methodology, not really on the ruling per se.

Sean McMahon  04:39

I got you. So some of them, like, I said, common sense prevailed. You know, at least that's one side of the argument. You might say. You know, Liberation Day back in April, caused tons of chaos in the markets, but I got to mention, it also created a lot of concern for business owners, right? And, you know, people like, you know, there's a headline. Right now about some of the huge corporations like FedEx and Costco trying to kind of fight the battle for refunds, and we're going to get to the refund, you know, part of this conversation a little bit later. But what I think Liberation Day also did it was for small and kind of medium business owners, you know, these organizations, these organizations that don't have, you know, staff dedicated to trade policy or don't consult with, you know, outside groups like KPMG, you know, for policy expertise that had to cause a lot of consternation among some of those folks. Have you heard from any of them?

Marc Busch  05:30

Lots of them. And it's hardly surprising Not a day goes by when you don't read a story about a small business that was completely blindsided by Liberation Day. In fact, today, the New York Times is regaling us with accounts of several small businesses which were baffled by what happened and are equally baffled today by the challenges inherent in getting those refunds that were promised by the Department of Justice, especially before the Court of Appeals for the Federal Circuit when the announcement was made that not only is the money in the bank, but interest will be paid once the tariffs are struck down, if, in fact, that's what the Supreme Court did. And obviously, that's exactly what the Supreme Court did, and now you've got this queuing at the court of international trade to get a refund in the event that Customs and Border Protection walks this one slowly to the cash register, so businesses were caught off guard, and you got to understand how many different questions suddenly came to the fore, what is our tariff code? What are us import tariffs on the tariff code that we think is relevant to our product that we're importing from abroad. Then there was the question, what does it mean to be usmca eligible? Because word quickly spread that if you were with enough Canadian, American and Mexican content under the terms of the US, Canada, Mexico Canada agreement, that you would have tariff relief so suddenly, across all three trade partners, there was this mad dash to understand, are we usmca eligible? That is not something that was necessarily a forte of small businesses who are relieved to even know their own tariff code, never mind to figure out whether they met the eligibility criteria in the trade agreement.

Sean McMahon  07:33

Yeah, it definitely sounds like there's many, many layers of complexity for some small and medium sized business owners, and one of the reasons I brought you on the show is because, in addition to, you know, having your expert knowledge on the whole tariff maze, you've also been a part of a team that's trying to deliver help for some of those, some of those businesses I'm talking about TariffWizard. This is a new tool that you and a small group of other like minded individuals have recently launched. Can you tell me a little bit more about what TariffWizard is and how it helps some of those business owners? 

Marc Busch  08:07

You bet. TariffWizard is a years long project of love with four of my former students now my co founders to bring to the Marcet a tool, an AI driven tool that helps especially small and medium sized businesses figure out what their tariff code is, make sure that they're running with the right tariff code to minimize the bill that is owed upon import and to do some diagnostics on their overall tariff strategy, such that, for example, they might with different individual component parts face a lower tariff bill if they were to combine those parts into a kit. At other times, our TariffWizard will instruct the importer to disassemble the kit and to bring in each component part by itself. So there's this great diagnostic that allows businesses to figure out not just what's my tariff code, but can I design to the right tariff code, by which I mean designed to a code that's going to insulate me more from paying this import duty to Customs and Border Protection. And then one of my favorite features is, let's say that you've been shipping into the United States under the wrong tariff code. What do you do then? And aside from the optimization strategy, we have a feature that allows the business to get AI support in drafting a letter to be submitted to Customs and Border Protection to suggest a different tariff code, the right tariff code to immediately bring some relief for the importer. And that is one of the features that I especially love to show businesses as they ask for demos of the TariffWizard.

Sean McMahon  10:00

Well, it really sounds like TariffWizard is so simple that it's for lack of a better comparison, it's kind of like the QuickBooks for tariffs?

Marc Busch  10:06

Well, Sean, now you're dating us talking about QuickBooks, but I'll go with that. Think about it as it's QuickBooks even easier, and it's all AI driven. So the reality is, yes, and it's getting easier by the week, because we keep meeting and talking about, well, what if it did this? What if it did that? And the more we do that, and the more we simplify, including being able to upload a picture of what we're talking about to get a tariff code, the more it becomes what QuickBooks should have been from the very start, had it been issued in 2026, instead of whenever it was, 

Sean McMahon  10:50

I got you so a much improved version of quickbooks

Marc Busch  10:52

Way better.

Sean McMahon  10:54

Okay, great. So you mentioned right there. You're doing some demos for some businesses for this tool. And I know it's early days. You know this, this tool just launched, but you know what's what's the response been so far? 

Marc Busch  11:04

It's really funny. The first question is always All right, what's under the hood? What are you really doing for me? What is this thing all about? And it takes about five minutes into the demo before the questions are Wow, how is that possible? Oh, my God. I didn't know. That's a question I should be asking. And by the time I get to the letter drafting for Customs and Border Protection, there's just a smile on the face of the business on the other side of the screen, because it's almost as though you've equipped this business with an entire gov affairs office flush with customs lawyers running around, making the calls and sending on advice with respect to Combining or decoupling inputs for the sake of overall corporate strategy. Think about it as a leveling of the playing field, and it really doesn't take long into the demo before the full suite of tools becomes obvious as a must have. So we've been having a lot of fun with these demos just because the code is the obvious first hook, but there's so much more to it. And a lot of businesses will admit after there's that level of comfort chatting about the issues that they didn't understand what questions they should be asking. And so especially when I've been talking to various trade associations around the country, one of the first things that comes up is, wow, I didn't get that. That's an issue. I didn't get that. That's something I should be thinking about in terms of designing this product or designing the next product. And so that's been a lot of fun to watch unfold since we got this thing up and running. And like I said, this has been a year in the making, so we're learning a lot with the companies that are coming to us for the demos, and we just keep expanding things that we like to roll out in future iterations. 

Sean McMahon  13:23

Okay, so, if I'm understanding you correctly, would it be fair to say that, you know, this new attention that's been focused on tariffs, you know, since Liberation Day, or even, you know, since the Trump administration first started, you know, kind of talking about what they were going to do. Are there instances where a company who's been paying a tariff for, you know, 234, years, because of this new focus, has discovered something that you know, a way to cut costs, or a different way to import a product that might be saving them money that never might have even crossed their mind before liberation day.

Marc Busch  13:53

Absolutely And when you talk to some businesses the way that they have been told of the workings of tariff codes, you'd almost imagine that the code came on stone tablets from a mountaintop, and there was no negotiation about it. There was no kind of tweaking it. And yet, as soon as you regale them with stories about companies that have designed products from the ground up to get away from a given tariff code, which the business knew was punishing. Then all of a sudden, that light bulb moment happens, and they begin to appreciate a lot more is within their reach than they ever thought possible. But you bet years, years of MIS applying the wrong tariff code. That's a double negative. I'm sure that doesn't actually work the way I said it, but nonetheless, you get the point. And it really isn't just limited to the small and medium sized businesses. There are some sizable companies that are not only discovering new rates because they've had the option. Through things that we're trying to capture in our optimization tool to get into a different code, right? That nothing is written, as I said, in stone, that you can tweak. You can use a different fabric, you can combine with a cloth and make it a kit. Or you can disassemble things that have come together and shipped separately. That's the stuff of the optimization effort that we offer through TariffWizard, and it's a really compelling tale to tell, because it's what the larger, more trade savvy companies have been doing forever, and we're just giving the same skill set AI driven to smaller and medium sized businesses today, given all the attention that has been focused on tariffs. Because, as you know, especially, not least given the 2026 trade policy agenda issued by the White House just the other day, tariffs are the tool, not a tool, the tool of US trade policy, and not just this year, going forward for some time.

Sean McMahon  16:04

All right, so tell me a little bit more about how this optimization tool works. I mean, is it on the business owner to kind of type in and describe what it is they're importing, or, you know, walk me through that process.

Marc Busch  16:16

So when you go on to a given government website, and let's say that you just start to Google, what's my tariff code? You're going to get this string of six to eight or more digits. And there's going to be a question that any business owner has, which is, is this true? So what we've done, AI backed, is offer this platform whereby the business owner can essentially talk to us, talk to the app, lay out the physical characteristics of the product layout, what is its intended use, and then after they've written down some thoughts, we'll ask them AI generated a number of really important questions which get at the key functionality of the product, because we're shopping for optimal tariff identification. And we are going to give you a couple of predictions. We're going to give you confidence rates tagged to each prediction, and then we're going to tell you what it would take to get a different code, given what you've shared with the AI. And so this process of vetting is as intuitive as it could possibly be. This is not about really demanding expectations, where we assume that you know a 12 digit tariff code before you engage. That's true for a lot of government and other websites, and for that matter, that's true for the WTO website. You can go on to the WTO tariff calculator. It's not really a calculator, but it tells you codes, but you had better know your code to get a rate. And this allows you just to freelance, to give us some intuition behind your product, what does it really do? Who does it really serve? We asked you a number of questions, and then we give you your choice set, looking to optimize your choice, which translates into minimize your tariff bill.

Sean McMahon  18:18

So as part of that process of describing the product. Can, can these business owners just take a picture of it? Does the AI read that? 

Marc Busch  18:24

So we're going to the point of being able to drop in a picture, but you're going to still have to answer some questions, because the way tariffs work, it really does come down to especially when you're combining different pieces. What's driving this gadget, this widget, what's ultimately doing the heavy lifting? And that matters a lot for us. It matters a lot for the businesses, tariff code, and we've got to come as precisely as we can to that point prediction. This is what you run with. Drop in the picture with some answers to a couple of questions, but let's essentially get to where this is. And I should point out that the fun part to not just where's the right code. How do you build to the right code? And then when you finally, potentially challenge the wrong code, our AI is drawing on case precedent will give you a feel for what has worked in terms of letters that have been submitted to Customs and Border Protection and what hasn't worked. And the letter will be crafted with all of that in mind, so it's highly informed decision making right at your fingertips, the expectations with respect to knowledge of tariff codes and customs issues really minimal, and that's one of the most attractive features of the platform. You don't have to know a lot to make a lot of good come out of your usage of the platform.

Sean McMahon  19:56

That's fascinating. And the platform itself generates the 10. Airflower, that these businesses will have to submit, that's right, and

Marc Busch  20:03

It shows you exactly how to submit on the Customs and Border Protection website.

Sean McMahon  20:08

All right, yeah, so from start to finish, it seems like 

Marc Busch  20:10

There's a story that I should point out Sean, that I first encountered a lifetime ago, before I went to grad school, I was a consultant, and I'll never forget meeting with this company, and it was a Massachusetts based company, and they said something which at the time I didn't fully understand. They said, US Customs thinks that we make speakers, we don't we make technology. And I remember thinking, wow, you're talking about a company that has been misunderstood by customs and border protection that their their their widget isn't quite the widget that the government thinks it is. And I've been teaching now for years tariff reclassification and the stories are tremendous, right? My favorite being Mattel ships a figurine from China called an X Men. And US Customs classifies that X Men figurine as a doll, which historically has meant human like Mattel goes to court and says it's not human like it's an X Men. Well, kudos to Mattel. They won, and the difference was phenomenal in terms of relieving them from the tariff burden that they had faced when that X Men figurine had been imported from China under a code, human like, it's not human like, what is it? Well, Mattel argued it's a non human, like figurine. It's it's an X Men. What do you want? That story has played out in other cases as well. What's a Snuggie? That was the subject of really interesting litigation too. The manufacturer went to court saying it's not clothing. The court said it's not a blanket, and a lot of money was on the line. They fought it out, and snuggie won. It was not considered clothing because you had no fastener under the arms, giving the otherwise blanket some context with respect to the body. These are the stuff of legends, right? But those are big companies with a lot of staff, and what TariffWizard does is it gives that same level of expertise to your small and medium sized business, such that you too can have that X Men figurine moment. You too can decide, is snuggie a blanket, or is it clothing? Oh my

Sean McMahon  22:46

Gosh, you're killing me here, Marc, those are some, some fantastic examples that drive the point home, though, that's for sure. So I mentioned earlier I want to kind of get back to the refund, you know, topic, and I guess, you know, quite facetiously, I'll just kind of ask, does does TariffWizard have a reverse button?

Marc Busch  23:08

And I'd love to tell you that our premium, premium edition definitely does, but I can't, so I won't, I wish it did. And there's a couple of ways to get at this refund issue. On the one hand, nothing should be needed. Sean, it should be kind of matter of factly, because Customs and Border Protection has been identifying IEEPA terrorists in their computer system. They've issued refunds on tariffs in the past, they can bloody well do it again. There shouldn't be the need for much of anything at all to facilitate that process. What you're seeing, though, in Costco going to the Court of International Trade, FedEx going to the Court of International Trade, 1000s going to the Court of International Trade is a lack of faith in the politics of the refund, and there isn't an app for a lack of faith in politics. If there was, I think I would be sitting somewhere quite luxurious right now, instead of where I am and we be wealthy beyond imagination. The truth is, though, it's that lack of faith that is causing big firms to finally get their heads out of the sand in this IEEPA tariff battle and get in queue to get their refunds. My hope is that the Department of Justice was being sincere before the Court of Appeals, where it said, we have the money. It's in the bank, we'll pay with interest. That had been one of the main reasons for a lot of what you saw in terms of the continuation of IEEPA tariffs under appeal, and it would be very deleterious to us to. Credibility were the government to backtrack now and say, as we've heard from both the President and his Secretary of the Treasury, that maybe the low road is years of litigation to see if and when there is a refund and who administers it, that would be seriously problematic,

Sean McMahon  25:25

Yeah, but it sounds like you've done a great job of outlining, you know, how it should work out, how you hope it will work out, and how you hope it doesn't work out, in terms of the slow roll of these tariffs. But you know, where do you think this lands in that spectrum?

Marc Busch  25:41

Well, we just had the other day the Court of Appeals saying that the Court of International Trade should set the terms, and the Court of International Trade had the first kick in the can with respect to the epi tariffs. I have every confidence that the Court of International Trade will urge that there be a process put in place that looks like how similar processes have unfolded in the past, but the politics of slow dragging will be up to the administration. Do they appeal a decision by the court of international trade and what happens after that? And this isn't a matter to be taken lightly, because, as you rightly pointed out at the outset of the show, you've got a lot of small businesses that have been stuck with big bills, and they haven't been able to hire because they've been waiting to see what happens. They are no longer as confident in terms of where they get their product from, if they're importing or parts of what they're importing. And so all of this has caused great consternation, and the uncertainty is overwhelming, and there has to be a beacon in the night for these small businesses. And like you said, my hope is, yes, that the Court of International Trade says to Customs and Border Protection, you know how to do this. So do it and we proceed on that basis.

Sean McMahon  27:12

All right. Well, I know there's a lot of business owners out there and importers out there that hope you're right, and hope that that's exactly how this plays out. So listen, Marc, I really appreciate your insights you know not only about the the big picture on tariffs, but also the details of TariffWizard. So thank you for your time today. 

Marc Busch 

Thank you. 

Sean McMahon

Well, that's our show for today, but before we get out of here, just a quick reminder to watch this feed for the next week, as we bring you episodes live from the sidelines of the futures industry Association's global cleared markets conference and if you like this show, please share it with your friends and colleagues, and be sure to follow us on Apple, Spotify, YouTube or wherever you get your podcasts. The Modern Money SmartPod is a production of SmartBrief, a Future company.