- Key insight: Banks’ commercial clients have become accustomed to trade-related uncertainty amid President Trump’s evolving statements on tariffs.
- Supporting data: A Supreme Court’s ruling last month could lead to tariff refunds up to $175 billion, according to one model, but banks’ commercial clients aren’t counting on windfalls.
- Expert quote: “The one constant that I’m hearing from people around here is the unpredictability, the volatility of not knowing where we stand with tariffs. And it makes it hard to invest.” — Pacific Valley Bank CEO Anker Fanoe.
For bankers and their commercial clients, the only certainty regarding foreign trade these days is uncertainty.
Companies that rely on imports had to be nimble amid the roller coaster of trade policy shifts following President Donald Trump’s “Liberation Day” last year. Many firms had been light on their toes for even longer, because the pandemic scrambled global supply chains.
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Last month brought more instability. First, the Supreme Court
Shortly after the ruling, Trump swiftly
And the chaos caused by Trump’s trade-related commentary continues. On Tuesday, after the U.S. president launched a war against Iran, he said he will “cut off all trade with Spain,” after the country denied the U.S. access to its military bases.
Uncertainty is a hamstring to companies’ long-term planning, and it can make firms less apt to borrow from banks than they would be otherwise. But
Christopher Maher, the CEO of OceanFirst Financial in New Jersey, said that for years — even since the first Trump administration in some cases — clients that are exposed to supply-chain friction have learned strategies to quickly optimize their operations, amid tariffs and other bottlenecks.
“Our clients understand that this is a fast-moving environment, and things will change,” Maher told American Banker. “They have been changing, they will likely continue to change. So [clients] don’t look at this as a permanent change in a particular tariff. They look at it and say, ‘Well, this is the tariff that will be in effect for the next few months.'”
In the last year, some OceanFirst clients have had to shift their supply chains, such as by importing beef from New Zealand instead of Argentina, Maher said. He also pointed to an example of a liquor retailer that made plans to remix its inventory if needed, to potentially sell more California wine instead of imports.
Some clients have kept inventory in a bonded warehouse, according to Maher, where it can be stored for years before they have to pay the tariffs on it.
Maher said the back-and-forth policy changes — even when the policies themselves aren’t bad for business — hamper companies’ ability to make major investments and strategy decisions.
“One of the most significant challenges you have is that the choppiness of the environment and the frequency of change comes at a cost,” Maher said. “It is costing us some amount of economic productivity to be spending time in cycles moving all of this around. It’s management’s time and attention.”
Tasnim Ghiawadwala, head of Citi’s commercial bank, said the megabank’s clients, which span 94 countries, have become “super resilient in times of heightened uncertainty,” and have multiple backup plans for various scenarios.
“They’ve become far more sophisticated in the way they think about their business models, their supply chains, the geographies they are in and why, as well as where to manufacture goods,” Ghiawadwala said.
In some cases, the latest 10% tariff marks a windfall for businesses, since previous import taxes on goods from certain countries, like Vietnam, China and Brazil, were previously far higher.
Lyle Cunningham, chief banking officer at Customers Bank in Pennsylvania, said that clients’ responses to the Supreme Court’s ruling have been more muted than they were to tariff moves last year, when rates were moving targets and varied across the world. But even though the current standard tariff rate across countries is more stable, “people are waiting for the other shoe to drop,” he said.
Anker Fanoe, CEO of Pacific Valley Bank in Salinas, California, said the higher tariffs Trump imposed last year have been a mixed bag for flower growers in the agricultural region where his bank operates.
Imported cuttings that flower growers use have gotten more expensive. But the same growers have been better positioned to compete for domestic retail business, as the cost of importing flowers from South and Central American growers has surged, Fanoe said.
“The one constant that I’m hearing from people around here is the unpredictability, the volatility of not knowing where we stand with tariffs,” Fanoe said. “And it makes it hard to invest.”
Parts of Trump’s latest tariff moves will lapse in July unless Congress acts. The administration has been resolute in defending its trade regime, but it’s uncertain how and when it will implement additional policies.
“It’s very clear they want to keep the tariff revenue at a certain level, and they’re going to implement the tariff similar to it was before,” said Lee Smith, leader of Baker Donelson’s international trade and national security practice. “Does that mean they’re going to try to keep the tariff rates the same among countries and products? Or are they using tariff rates to punish or give relief and have leverage in the negotiations?”
Refund resolution
The Supreme Court’s ruling that the Liberation Day tariffs were collected illegally could mean that importers receive refunds up to $175 billion, according to the Penn Wharton Budget Model. The justices sent to the lower courts the issue of whether and how such refunds should be delivered.
Following the Supreme Court’s verdict, Citi’s Ghiawadwala said there’s a “glimmer of hope” among clients around the potential for refunds.
But Maher said OceanFirst is advising clients not to count on getting cash back.
“It may be that this winds its way through the courts and there are refunds,” Maher said. “I can’t speak to whether that would happen or not. But our assessment is that if there are refunds, they are not coming anytime soon.”
Baker Donelson’s Smith said that some businesses are treating a potential refund as an unexpected bonus, while others desperately need the cash back immediately.
“The refunds aren’t coming for some time, and you want to make sure you begin the conversation about refund and keep a good relationship,” he said. “You don’t want to reach out in a few months and say, “Where’s my refund,” and they say they didn’t file for one.”
Kate Berry, Allissa Kline and Kevin Wack contributed to this story.