WASHINGTON — As the Supreme Court struck down President Trump’s biggest tariffs, the justices left a $133-billion question unanswered: What’s going to happen to the money the government has already collected in import taxes now declared unlawful?
Companies have been lining up for refunds. But the way forward could prove chaotic.
When the smoke clears, trade lawyers say, importers are likely to get money back — eventually. “It’s going to be a bumpy ride for a while,” said trade lawyer Joyce Adetutu, a partner at the Vinson & Elkins law firm.
As the contours of the challenge begin to take shape, Trump on Saturday announced he planned to increase to 15% from 10% the new tariffs he announced after his Supreme Court defeat, using a different legal authority.
The refund process is likely to be hashed out by a mix of the U.S. Customs and Border Protection agency, the specialized Court of International Trade in New York and other lower courts, according to a note to clients by lawyers at the legal firm Clark Hill.
“The amount of money is substantial,” Adetutu said. “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 decisively the Supreme Court repudiated Trump’s tariffs.
In its 6-3 opinion on Friday, the court ruled Trump’s attempt to use an emergency powers law to enact the taxes was not valid. Two of the three justices appointed by Trump joined the majority in striking down the first major piece of his second-term agenda to come before them.
At issue are double-digit tariffs Trump imposed on almost every country in the world last year by invoking the 1977 International Emergency Economic Powers Act, or IEEPA. The Supreme Court ruled that the law did not give the president authority to tax imports, a power that belongs to Congress.
The U.S. customs agency had already collected $133 billion in IEEPA tariffs as of mid-December. But consumers hoping for a refund are unlikely to be compensated for the higher prices they paid when companies passed along the cost of the tariffs; that’s more likely to go to the companies themselves.
In a dissenting opinion, Justice Brett M. Kavanaugh noted that the ruling dodged the refund issue: “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.’’
Borrowing a word that Justice Amy Coney Barrett — who sided with the majority — used during the court’s November hearing on the case, Kavanaugh warned 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 news conference Friday, in which he complained about the court’s decision and insulted the justices who voted for it. “We’ll end up being in court for the next five years.’’
The end of the IEEPA tariffs could help the economy by easing inflationary pressures. The tariff refunds — like other tax refunds — could stimulate spending and growth. But the impacts are likely to be modest.
Most countries still face steep tariffs from the U.S. on specific sectors, and Trump intends to replace the IEEPA levies using other options. The refunds that do get issued will take time to roll out — 12 to 18 months, TD Securities estimates.
The U.S. customs agency does have a process for refunding duties when importers can show there’s been some kind of error. The agency might try to build on the existing system to refund Trump’s IEEPA tariffs, said trade lawyer Dave Townsend, a partner with the law firm Dorsey & Whitney.
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 harbor maintenance fee on exports and set up a system for exporters to apply for refunds.
But the courts and U.S. customs have never had to deal with anything like this — thousands of importers and tens of billions of dollars at once.
“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,″ said trade lawyer Alexis Early, partner at the law firm Bryan Cave Leighton Paisner.
Ryan Majerus, a partner at King & Spalding and a former U.S. trade official, said it’s hard to know how the government will deal with the massive demand for refunds. It might try to streamline the process, perhaps setting up a special website where importers can claim their refunds.
But Adetutu warns 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’’ — maybe forcing them to go to court to seek the refunds.
Many companies, including Costco, Revlon and canned seafood and chicken producer Bumble Bee Foods, filed lawsuits claiming refunds even before the Supreme Court ruled, essentially seeking to be at the head of the line if the tariffs were struck down.
There are likely to be more legal battles ahead. Manufacturers might, for example, sue for a share of any refunds given to suppliers that jacked up the price of raw materials to cover the tariffs.
“We may see years of ongoing litigation in multiple jurisdictions,’’ Early said.
Consumers, though, are unlikely to enjoy a refund windfall. The higher prices they’ve had to pay would probably be hard to attribute to a specific tariff. Should they pursue refunds anyway? Early wouldn’t advise wasting money on legal fees, but said: “In America, we have the ability to file a lawsuit for anything we want.’’
Gov. Gavin Newsom called the tariffs an illegal tax on California’s consumers, ranchers and farmers and businesses, and said the Trump administration was obligated to refund $1,750 per family to make up for the cost increases driven by the import taxes.
Illinois Gov. JB Pritzker also demanded a refund on behalf of his state’s 5.11 million households. In a letter addressed to Trump and released by Pritzker’s gubernatorial campaign, the governor said the tariffs had cost each Illinois household $1,700 — or $8.7 billion. Pritzker said failure to pay will elicit “further action.’”
Nevada Treasurer Zach Conine submitted a payment request to the federal government for $2.1 billion to recoup the costs of the tariffs, his office announced 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.
Some foreign companies may also stake a claim to any tariff refunds.
Bernd Lange, chairman of the European Parliament’s trade committee, estimates German companies or their U.S. importers alone overpaid more than $118 billion.
Speaking on Deutschland radio, Lange said that excess tariffs “must be refunded.”
Wiseman writes for the Associated Press. AP writers Lindsay Whitehurst and Christopher Rugaber in Washington, Jessica Hill in Las Vegas and John O’Connor in Springfield, Ill., contributed to this report.
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