The Supreme Court ruling striking down President Trump’s emergency tariff authority is expected to result in what Justice Brett M. Kavanaugh, who opposed the decision, called “a mess.”
That’s because the administration may have to refund more than $100 billion in tariff revenue to thousands of American importers — a recoupment process that is unparalleled in scale and complexity.
Trade lawyers, economists and lawmakers all appeared to agree that things were about to get pretty complicated after the sweeping tariffs Mr. Trump imposed on the basis of national security were struck down by the court. The ruling is expected to set off a head-spinning process that could take months or even years as thousands of companies seek to recoup the import duties that they paid.
Even Mr. Trump was uncertain how the process worked on Friday, lamenting at a White House briefing that the Supreme Court did not explicitly explain what to do about refunds.
“Wouldn’t you think they would have put one sentence in there saying that keep the money or don’t keep the money?” Mr. Trump said. “I guess it has to get litigated for the next two years.”
The president, who spent months warning that a loss at the court would doom the United States economy, subsequently added that the litigation could take half a decade.
The Supreme Court is leaving it to lower courts and the U.S. Court of International Trade to initiate the refund process, which will be carried out by Customs and Border Protection and the Treasury Department.
The Trump administration’s lawyers previously said in a motion submitted to the trade court that the government would comply with an order to refund the tariff payments if the tariffs were found to be unlawful. But Treasury Secretary Scott Bessent said in a speech in Dallas on Friday that additional litigation involving the refund process could take weeks, months or more — if ever — for the refunds to flow.
“I’ve got a feeling the American people won’t see it,” Mr. Bessent said at the Economic Club of Dallas.
Following the ruling, Senator Maria Cantwell, a Democrat from Washington, sent a letter to Mr. Bessent on Friday asking for “detailed information about how the Administration plans to fairly and expeditiously reimburse the payors of those tariffs.”
The refunds and lost federal revenue could make it harder for Mr. Trump to keep many of his policy promises that were predicated on being paid for by tariffs.
A Cato Institute tracker of Mr. Trump’s tariff policies found that the president claimed over 15 months that he could use that money to pay for 11 different federal government policies or programs.
The promises have included $500 billion for a “dream military,” $2.6 billion for “warrior dividends” for military service members and the $12 billion bailout that the White House provided to American farmers who faced retaliation from Mr. Trump’s trade war. The farm aid money, which was paid, did not technically come from tariff money even though Mr. Trump suggested that those funds offset the cost.
He also promised $2,000 rebate checks for low- and middle-income Americans and suggested that tariff revenue could be used to reduce or eliminate the federal income tax.
Mr. Bessent said that the alternative tariffs that the Trump administration plans to employ will make up for nearly all of the tariff revenue that the United States would have taken in this year from the tariffs that were struck down.
Even with plans for new tariffs in the works, the Trump administration is still required to refund importers for the unlawful tariffs that they already paid.
Before the Supreme Court ruling on Friday, the overall effective tariff rate — that is, the average tax owed on all imports — was 16.9 percent, according to estimates by the Budget Lab at Yale.
That figure would fall to 9.1 percent if the tariffs that the court rejected are allowed to lapse and aren’t replaced. But if Mr. Trump follows through on his promise to impose a 10 percent across-the-board tariff using a different legal authority, and if he is able to keep that policy in place, the Budget Lab estimates that the effective tariff rate will end up being 15.4 percent — most of the way back to where it was before the day began.
The Trump administration could allow companies to request tariff refunds in a relatively straightforward manner. When the Supreme Court struck down an export tax in 1998, for example, the government set up a system to refund the companies that had paid the tax with interest, with the U.S. Court of International Trade overseeing the process.
The Trump administration has not made clear whether it will try to streamline the refund process or if it will seek to stall the payments.
“Even in the best of circumstances, it is going to be quite a heavy lift administratively and take quite a bit of time to sort through and process those refunds,” said Greta Peisch, former general counsel for the U.S. trade representative.
Ms. Peisch, a partner with the law firm Wiley Rein, said that it is possible that individual companies will still have to file lawsuits to claim their refunds or that a class-action lawsuit involving many companies could happen if the Trump administration does not create a more simplified claims process.
Although importers that paid the tariffs are the only ones who are directly eligible for refunds, the ruling could also lead to a cascade of additional lawsuits by other businesses that paid higher prices to importers that passed on the tariff costs.
Estimates for the pool of money that could be recouped range anywhere from $100 billion to $200 billion.
“They’re not going to be cutting checks to anybody anytime soon. You’re going to have multiple courts in multiple jurisdictions issuing multiple rulings,” said Eric Winograd, chief U.S. economist at AllianceBernstein. “Lots of people are going to be willing to go to court for their share.”
David Kelly, chief global strategist at J.P. Morgan Asset Management, said that even if refunds are issued, he did not expect consumers to receive any relief directly. That’s because of how difficult it is to prove that they paid a portion of the tariffs despite research showing that the burden fell in part on them.
Using import data through November, a group of economists at the Federal Reserve Bank of New York found that nearly 90 percent of the economic costs associated with tariffs have fallen on U.S. businesses and their customers.
“You’ll never get the money back to consumers,” Mr. Kelly said. “Ultimately, the only people who can prove that they paid the tariffs are the importers.”
The lack of refunds for consumers is likely to be another political liability for the Trump administration, which has faced criticism from Democrats for pushing up prices with tariffs.
“Giant corporations with their armies of lawyers and lobbyists can sue for tariff refunds, then just pocket the money for themselves,” said Senator Elizabeth Warren, a Massachusetts Democrat. “Any refunds from the federal government should end up in the pockets of the millions of Americans and small businesses that were illegally cheated out of their hard-earned money by Donald Trump.”
How significantly the Supreme Court’s decision affects the economy will depend in large part on how the refunds are handled, said Raphael W. Bostic, the outgoing president of the Federal Reserve Bank of Atlanta. It will also depend on if companies change their daily operations to account for the latest ruling.
“Is there a requirement to pay back the firms that have paid in the tariffs? If so, that’s a lot of disruption,” Mr. Bostic said on Friday at an event in Birmingham, Ala.
If refunds do flow and Mr. Trump is slow to replace the tariffs, they could potentially end up jump-starting the economy by giving businesses more money to invest.
“We urge the lower court to ensure a seamless process to refund the tariffs to U.S. importers,” said David French, executive vice president of government relations at the National Retail Federation. “The refunds will serve as an economic boost and allow companies to reinvest in their operations, their employees and their customers.”
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
The post Supreme Court Tariff Ruling to Spur Chaotic Refund Process appeared first on New York Times.
