President Donald Trump's administration will have its work cut out for it in deciding how, and whether, to refund an estimated $175bn in tariffs collected using emergency authorities that the US Supreme Court ruled on Friday were unlawful.
The upcoming refund process is likely to be a "mess" as the US may be required to refund "billions of dollars" to importers, associate justice Brett Kavanaugh wrote in a dissent to the court's 6-3 decision throwing out tariffs Trump imposed under International Emergency Economic Powers Act (IEEPA).
Among the likely complications will be the billions of dollars involved, and the sheer number of importers that could be eligible for refunds. Trump last year used dire terms to describe the outcome of an unfavorable court ruling on tariffs that has now arrived.
"It would be impossible to ever recover, or pay back these massive sums of money and honor," Trump said last August. "It would be 1929 all over again, a GREAT DEPRESSION!"
US government attorneys have already conceded during litigation over the tariffs that importers that have sued would be entitled to refunds. But neither the Trump administration, nor the Supreme Court's ruling on the tariffs, has offered clear guidance on how refunds will work for the vast numbers of other parties that have paid the IEEPA tariffs.
"There's a whole specialized body of trade law," attorney Neal Katyal said during oral argument in the tariff case at the Supreme Court, where he was representing importers. "It's a very complicated thing. There's got to be an administrative protest."
Hundreds of companies, including refiners Valero and Marathon Petroleum, already have filed lawsuits seeking to recover the tariffs.
The court ruling on Friday will have no effect on more traditional tariffs that Trump has imposed on steel, aluminum, auto parts and cars. Complicating any potential refund process in the near-term is the fact that US Customs and Border Protection (CBP), the agency responsible for collecting and processing federal tariffs, has been partly shut down since 14 February because of a funding impasse. Earlier this year, CBP updated an electronic refund process that replaced checks, but the agency has yet to say how it will handle IEEPA tariffs.
Neither the White House nor CBP responded immediately to requests for comment. Trump is preparing to give a press conference on Friday to discuss the ruling.
Trump began imposing tariffs under IEEPA last year, an authority he delighted in using. The US had collected $133bn in tariffs under IEEPA as of December, an amount that since then has likely risen to $175bn, according to economists at the University of Pennsylvania Wharton School. Losing that revenue — and future tariff revenue — will cut off revenue anticipated to total $2 trillion over the next decade.
"The country will now be about $2 trillion deeper in the hole," Committee for a Responsible Federal Budget president Maya MacGuineas said. "This is very bad news."
US retailers, automakers and other merchants have previously said they were absorbing the cost of some of the tariffs in anticipation of a potential ruling striking them down, while also raising prices to cover their additional costs. But it is unlikely that merchants receiving refunds will directly pass those savings along to customers that already paid inflated prices.
"They're not going to go to consumers, right?" former US trade representative Robert Lighthizer told participants at the Argus Americas Crude Summit in Houston, Texas on 4 February. They "are going to go to the middleman."
Democrats are already using the outstanding issue of tariff refunds to attack Trump and his Republican allies ahead of the midterm congressional elections in November. They say across-the-board tariffs have driven up the price of everyday goods, undermined alliances with key trading partners and allowed Trump to enrich himself.
"Every dollar unlawfully taken must be refunded immediately — with interest," California governor Gavin Newsom (D) said. "Cough up!"
