The US Supreme Court on Friday invalidated President Donald Trump’s most sweeping and ambitious tariffs, leaving a whopping $133 billion question unanswered – what happens to the import taxes the administration has already collected under levies now deemed unlawful?
The justices who delivered the 6-3 ruling, killing tariffs that the US President announced as soon as he returned to the White House in January last year and implemented in August, did not say anything on refunds of the $133 billion already collected under Trump’s levy measure. Track latest in Trump tariffs here
Businesses are already seeking refunds, but the path ahead could be rocky.
Once the dust settles, trade attorneys say importers will probably recover their money – eventually. “It’s going to be a bumpy ride for awhile,” Associated Press (AP) quoted trade lawyer Joyce Adetutu, a partner at the Vinson & Elkins law firm, as saying.
According to a client advisory from attorneys at Clark Hill, the refund process will likely be worked out through a combination of the US Customs and Border Protection agency, the specialised Court of International Trade in New York and other lower courts, AP reported.
“The amount of money is substantial,” Adetutu said, adding: “The courts are going to have a hard time. Importers are going to have a hard time.”
Still, she added, “it’s going to be really difficult not to have some sort of refund option” given how forcefully the Supreme Court rejected Trump’s tariffs.
The Supreme Court ruling
In a 6-3 ruling Friday, the US Supreme Court found that Trump’s use of an emergency powers statute to impose the tariffs was invalid. Two of the three justices he appointed joined the majority in striking down the first significant measure of his second-term agenda to reach the high court.
The case centered on double-digit tariffs Trump placed on nearly every country last year under the 1977 International Emergency Economic Powers Act (IEEPA). The Supreme Court determined that the law does not grant the president authority to tax imports – a power reserved for Congress.
As of mid-December, the US customs agency had collected $133 billion in IEEPA tariffs. Consumers hoping for reimbursement, however, are unlikely to see direct compensation for higher prices paid when companies passed on tariff costs – any refunds would more likely go to the businesses themselves.
In a dissenting opinion, Justice Brett Kavanaugh criticised the majority for sidestepping the refund question: “The Court says nothing today about whether, and if so how, the Government should go about returning the billions of dollars that it has collected from importers.”
Echoing a term used by Justice Amy Coney Barrett – who joined the majority – during November arguments, Kavanaugh cautioned that “the refund process is likely to be a mess.'”
“I guess it has to get litigated for the next two years,” Trump told reporters at a Friday press conference, where he condemned the ruling and said he was “absolutely ashamed” of some justices who voted against his tariffs. “We’ll end up being in court for the next five years,” he said.
Have such refunds been given before?
The elimination of the IEEPA tariffs could provide some economic relief by easing inflationary pressures. Like other tax refunds, the repayments could spur spending and growth, though the overall effects are expected to be limited.
Many countries will still face substantial US tariffs in certain sectors, and Trump has indicated he intends to replace the IEEPA levies through other mechanisms. Any refunds that are issued will take time – between 12 and 18 months, according to estimates from TD Securities.
The US customs agency reportedly does have procedures in place to refund duties when importers can demonstrate an error. Trade lawyer Dave Townsend, a partner at Dorsey & Whitney, said the agency could expand that system to handle refunds for the IEEPA tariffs.
And there has been a precedent for courts making arrangements to give companies their money back in trade cases. In the 1990s, the courts struck down as unconstitutional a harbour maintenance fee on exports and set up a system for exporters to apply for refunds, according to AP.
Still, neither the courts nor US customs have confronted a situation of this scale – involving thousands of importers and tens of billions of dollars simultaneously.
“Just because the process is difficult to administer doesn’t mean the government has the right to hold on to fees that were collected unlawfully,” trade lawyer Alexis Early, partner at Bryan Cave Leighton Paisner, was quoted as saying.
Ryan Majerus, a partner at King & Spalding and former US trade official, said the government’s approach to managing the surge in refund requests remains uncertain. Officials might attempt to streamline the process, perhaps by creating a dedicated website where importers can submit claims.
But Adetutu cautioned that “the government is well-positioned to make this as difficult as possible for importers. I can see a world where they push as much responsibility as possible onto the importer” – potentially requiring companies to go to court to recover their funds.
Several companies, including Costco, Revlon, and canned seafood and chicken producer Bumble Bee Foods, had already filed lawsuits seeking refunds before the Supreme Court issued its decision, aiming to secure an early position should the tariffs be overturned.
Additional legal disputes are likely. For instance, manufacturers could pursue a share of refunds awarded to suppliers that increased raw material prices to offset the tariffs.
“We may see years of ongoing litigation in multiple jurisdictions,” Early said.
Consumers, however, are unlikely to receive any significant refund windfall. The higher prices they paid would be difficult to link directly to a specific tariff.
Illinois governor JB Pritzker, a Democrat and frequent Trump critic, is seeking a refund on behalf of his state’s 5.11 million households. In a letter to Trump released by his gubernatorial campaign, Pritzker estimated the tariffs cost each Illinois household $1,700 – a total of $8.7 billion – and warned that failure to reimburse the state would prompt “further action.”
Nevada treasurer Zach Conine also submitted a $2.1 billion reimbursement request to the federal government to recover tariff-related costs, his office said Friday.
“As Nevada’s chief investment officer, I have a responsibility to try to recoup every single dollar that the Trump Administration takes from Nevada families,” Conine said in a statement.