The U.S. Supreme Court on Friday invalidated President Donald Trump’s most sweeping and ambitious tariffs, leaving a massive $133 billion question unanswered — what happens to the import taxes the administration has already collected under duties now deemed illegal?
The justices who issued the 6-3 ruling, overturning the tariffs announced by the US President as soon as he returned to the White House in January last year and implemented in August, did not say anything about recovering the $133 billion already raised under Trump’s tax measure. Track the latest on Trump’s tariffs here
Companies are already seeking refunds, but the road ahead could be tough.
Once the situation calms down, trade lawyers say importers may get their money back – eventually. “It’s going to be a bumpy ride for some time,” business lawyer Joyce Adetotu, a partner at law firm Vinson & Elkins, was quoted as saying by the Associated Press (AP).
According to a client advisory from lawyers at Clark Hill, the recovery will likely go through a combination of the U.S. Customs and Border Protection Agency, New York’s Specialized International Trade Court and other lower courts, the AP reported.
“The amount of money is huge,” Adetoto said, adding: “The courts will have a difficult time. Importers will have a difficult time.”
“It would be really difficult to not have some sort of clawback option,” given how strongly the Supreme Court rejected Trump’s tariffs, she added.
Supreme Court ruling
In a 6-3 ruling on Friday, the US Supreme Court found that Trump’s use of the Emergency Powers Act to impose the tariffs was invalid. Two of the three justices he appointed joined the majority in striking down the first major measure on his second term’s agenda to reach the Supreme Court.
The case centered on the double-digit tariffs that Trump imposed on nearly every country last year under the 1977 International Emergency Economic Powers Act (IEEPA). The Supreme Court decided that the law does not give the president the authority to impose taxes on imports, a power reserved to Congress.
As of mid-December, the US Customs Agency had collected $133 billion in IEEPA tariffs. However, consumers hoping to repay are unlikely to see direct compensation for the higher prices paid when companies pass on tariff costs – any refunds are likely to go to the companies themselves.
In a dissenting opinion, Justice Brett Kavanaugh criticized the majority for ignoring the refund issue: “The Court says nothing today about whether, and if so how, the government should proceed to return the billions of dollars it has collected from importers.”
Echoing the term used by Justice Amy Coney Barrett — who joined the majority — during November arguments, Kavanaugh warned that “the recovery process is likely to be a mess.”
“I think there should be a lawsuit filed within the next two years,” Trump told reporters at a news conference on Friday, where he condemned the ruling and said he was “absolutely ashamed” of some of the judges who voted against his tariffs. “We will end up being in court for the next five years,” he said.
Have such refunds been offered before?
Eliminating the IEEPA tariffs could provide some economic relief by alleviating inflationary pressures. Like other tax refunds, installment payments can stimulate spending and growth, although the overall effects are expected to be limited.
Many countries will still face significant US tariffs in certain sectors, and Trump has indicated that he intends to replace ISA tariffs through other mechanisms. Any refunds issued will take 12 to 18 months, TD Securities estimates.
The US Customs Agency reportedly has procedures in place to recover duties when importers can prove an error. The agency could expand that system to handle IEEPA tariff refunds, said trade lawyer Dave Townsend, a partner at Dorsey & Whitney.
There has been a precedent where courts have made arrangements to return corporate funds in commercial cases. In the 1990s, courts struck down port maintenance fees on exports as unconstitutional and created a system for exporters to apply for refunds, according to the AP.
However, neither the courts nor US Customs have faced a situation of this magnitude – involving thousands of importers and tens of billions of dollars simultaneously.
“Just because the process is difficult to manage does not mean the government has the right to keep fees that were illegally collected,” trade lawyer Alexis Early, a partner at Brian Cave Leighton Beisner, was quoted as saying.
The government’s approach to managing the increase in refund requests remains uncertain, said Ryan Majerus, a partner at King & Spalding and a former US trade official. Officials may try to simplify the process, perhaps by creating a dedicated website where importers can submit claims.
But Adetoto warned: “The government is well placed to make this as difficult as possible for importers. I can see a world where they impose as much liability on the importer as possible” – which could require companies to go to court to recover their money.
Several companies, including Costco, Revlon and canned seafood and chicken company Bumble Bee Foods, have already filed lawsuits seeking refunds before the Supreme Court issues its decision, aiming to secure an early position if the tariffs are eliminated.
Additional legal disputes are likely to occur. For example, manufacturers could receive a share of the refunds given to suppliers who increased raw material prices to offset tariffs.
“We may see years of ongoing litigation in multiple jurisdictions,” Early said.
However, consumers are unlikely to receive any significant windfall gains in cash back. It would be difficult to link the high prices they paid directly to a specific tariff.
Illinois Governor J.B. Barr is seeking Whitzker, a Democrat and frequent Trump critic, sought the refund on behalf of his state’s 5.11 million households. In a letter to Trump released by his gubernatorial campaign, Pritzker estimated that the tariffs cost each Illinois household $1,700 — a total of $8.7 billion — and warned that failure to compensate the state would lead to “further action.”
Nevada Treasurer Zach Kuhnen also submitted a $2.1 billion reimbursement request to the federal government to recover costs related to the tariffs, his office said Friday.
“As Nevada’s chief investment officer, I have a responsibility to try to recover every dollar the Trump administration takes from Nevada families,” Conine said in a statement.
