During the first term of U.S. President Donald Trump, then Secretary of Commerce Wilbur Ross stated that tariffs had only one purpose: to reduce the trade deficit. Seven years later, he said that the president was now using tariffs for other purposes, and the refunds resulting from the Supreme Court overturning some of those tariffs were also going to the wrong people.

"The situation is completely different now," Ross told Fortune magazine. "He made this decision not just to use tariffs to change the trade deficit. He uses them for a variety of other purposes as well. So, it's a completely different conceptual approach."

He described Trump's second term as one with "different goals."

Rectify trade balance

Since importers pay tariffs at the border, they have to decide whether to absorb the costs themselves or pass them on to others. In fact, most of these costs ultimately fall on consumers: Data from the Federal Reserve shows that American families have borne about 90% of the tariff costs during Trump's second term in office.

During Trump's first term, Ross's tariffs were based on Section 232 of the Trade Expansion Act of 1962, which allows the president to restrict imports that pose a threat to national security. In February 2018, Ross determined that imported steel and aluminum met this criterion and submitted the results of the Department of Commerce's investigation to Trump, citing China's large steel production. On March 8, Trump imposed a 25% tariff on imported steel and a 10% tariff on aluminum, and subsequently continued to grant or revoke exemptions for individual countries for the rest of that year.

"My responsibility is to work hard to restore trade balance and try to get it back to a more reasonable state," Ross said.

During Trump's second term, another law was utilized for imposing tariffs—the International Emergency Economic Powers Act. This law grants the president extensive trade powers when a state of emergency is declared. He used this law to impose tariffs on nearly all trading partners and also applied tariffs to non-trade-related targets; for example, he imposed a 40% tariff on imported goods from Brazil due to that country's prosecution of former President Jair Bolsonaro.

Ross said that Trump is able to go further this time because he returns with more power.

"When he entered his second term, he was much stronger than when he first took office," Ross said. "During his first term, he didn't have control over Congress, nor did he truly have control over the Republican Party. In his second term, he clearly had control over both, so he had the ability to do more things in the way he wanted."

But in the end, it is still the president's decision.

"This is not a matter for the Ministry of Commerce to decide," Ross said, "it is the President who has decided to expand the uses of tariffs."

Where do customs duty refunds go?

After the Supreme Court ruled that the government needed to pay importers approximately $166 billion, Ross warned in March of this year that consumers would be the biggest losers; he still holds this view today and states that it remains doubtful whether those who receive refunds are actually the ones who bore the costs in the first place.

"I think that since the refund was given to the right person, there are some serious issues with this matter," he said. "Assuming I were the importer and I wrote the customs duty check, it's very likely that I would pass on a part or all of that cost to my customers. If they now give me the refund, I will actually be receiving more money than I initially spent. I'm very surprised by how they handled this situation."

Companies have different attitudes towards how to handle this windfall. UPS and FedEx have promised to refund the money to their customers. Amazon, on the other hand, stated that it received approximately $640 million in refunds during the second quarter, but may only refund a limited number of customers. Consumers filed a class action against the company in May, and its financial director indicated that Amazon mainly absorbed the cost of tariffs on its own rather than passing them on to others.

Ross uses Amazon as an example to illustrate his point of view.

"Suppose you are Amazon, and suppose you pass on half of the tariffs to your customers. Why should you get more than half of the refund?" he said, "It is actually the customer who ends up paying this money. The customer doesn't receive any refund, yet they are the ones who pay in the end."

In his view, any importer that shifts part of the costs onto others “has obtained additional profits due to tariffs,” which he considers to be a result that is “conceptually flawed.”