Supreme Court ruling could force U.S. to refund $165B in Trump-era tariffs

The United States government could be on the hook for $165 billion in refunds if the Supreme Court rules that Trump’s tariffs were imposed illegally.

Those tariffs, which collected massive sums from importers this fiscal year, could be returned to companies across the country. But the process would not be smooth.

Refunds are mostly paid with paper checks, and experts warn that even with the government’s resources, a fast refund system is unlikely. This refund crisis would add more chaos to a trade policy that already created confusion for businesses and financial markets since Trump began his tariff push.

Trump has repeatedly claimed that the tariffs made the United States “very rich again” and signaled that the money was being eyed for policy goals. He and his allies have discussed using the tariff funds to cut the national debt, help farmers, or even send rebate checks to Americans.

But losing the court fight means he may be forced to give the money back. The administration is expected to quickly impose new levies under different legal powers if the current tariffs are struck down.

The Supreme Court will hear the case in November. Even with tens of billions collected from tariffs, the fiscal deficit by August had already reached $1.97 trillion, the third-largest for that period on record, behind only the pandemic years.

Businesses face refund chaos

The uncertainty around refunds has left many importers doubting they will see any money at all. “I have zero faith we’d ever get anything. Just zero,” said Harley Sitner, who runs Peace Vans, a camper van repair shop in Seattle.

Sitner said the unpredictability of Trump’s trade war is worse than paying the duties themselves. He received surprise tariff bills from $221 to $17,000, sometimes months after receiving goods. After one shipment from Germany worth $2,324 came with a $1,164 tariff, Sitner stopped bringing in overseas inventory altogether.

Some customs brokers say Wall Street firms are circling to buy claims on refunds, letting importers recover at least part of what they might be owed. Most of the jump in customs duties, up $95 billion from the year before, comes from Trump’s tariffs on imports from dozens of countries that started in August, according to Bloomberg.

Two lower courts have already ruled that Trump lacked authority under the International Emergency Economic Powers Act to impose these tariffs. If the Supreme Court upholds those rulings, about half of all customs duties collected this year could be refunded. Agencies continued tariff operations even during the government shutdown.

U.S. Customs and Border Protection normally approves refunds for overpayments or rule changes, and the Treasury Department issues checks. But it is not automatic. Importers or their brokers must follow strict and sometimes unclear timelines and file the right paperwork to preserve their rights.

The majority of refunds are still issued as paper checks. Earlier this year the Trump administration ordered Treasury to phase out check payments by September 30, but CBP only rolled out the first step last week.

Without urgent changes, the system will not be ready in time for a court ruling. “It’s possible that we’ll see millions and millions of paper checks being mailed out because each shipment, each customs entry, will have its own,” said Tom Gould, a customs consultant based in Seattle.

Refund system risks theft and lawsuits

Checks will only go to approved domestic banks in dollars. Foreign importers will have to rely on international mail or brokers’ accounts in the United States. Gould noted that refund checks have already been stolen and sold on the dark web before being cashed.

The administration could speed refunds by automatically processing claims with existing data. CBP has done that before, creating a system for refunds under the Generalized System of Preferences program, which Congress often let lapse before renewing.

Importers included codes to show goods qualified for GSP even when the program was inactive. CBP could use the same approach now to identify tariffs paid under IEEPA codes.

But the administration could also make it harder. Experts warn importers might need to file their own lawsuits to get their money back. They could be forced to file a protest or post-summary correction with proof of every payment and copies of all importer data already held by the government.

EY’s Brown advises importers to save all CBP Automated Commercial Environment data and log every entry date and deadline to boost their chances. Even if CBP took the easy route, refunding money through multiple layers of financial transactions could still be messy.

Importers using couriers like FedEx or UPS to handle tariff paperwork and payments would see refunds issued to the importer of record, usually the courier, not the owner of the goods. This creates potential conflicts between importers and parcel handlers, another obstacle to getting money back.

Claim your free seat in an exclusive crypto trading community - limited to 1,000 members.