Sore Losers at the Supreme Court: The Government Doesn’t Want to Pay Back Unlawful Tariff Money After All

The Trump administration appears to be in no hurry to provide an answer—and may even be planning to keep billions of dollars that it owes American businesses. Reasonable minds can differ about whether lawful taxation is “theft”; in this case, however, there’d be no question.

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Scott Lincicome, Nathan Miller, and Alfredo Carrillo Obregon

The Supreme Court’s invalidation of President Trump’s International Emergency Economic Powers Act (IEEPA) tariffs was a welcome rebuke of executive overreach. But as Scott Lincicome wrote for Bloomberg earlier this week, the ruling leaves a huge question unanswered: What happens to the over $170 billion in tariff money that the federal government unlawfully collected from US importers?

Unfortunately, the administration appears to be in no hurry to provide an answer—and may even be planning to keep billions of dollars that it owes American businesses. Right after the ruling, Trump said litigation over refunds could take years. Treasury Secretary Scott Bessent told NBC News on February 25 that the administration would wait for the lower courts to sort things out—a process that would take several months at best. And just today, Politico reported that the administration is devising legal strategies to keep the illegally collected money, including by promising faster refunds if companies agree to let the government keep some of the money that these firms are owed.

The administration’s position is an unfortunate change of heart.

As Lincicome wrote on this blog months ago, the path forward on IEEPA tariff refunds could be easy. The government has owed refunds with interest every other time it unlawfully collected import duties. It has the administrative capacity to quickly provide IEEPA refunds—no litigation needed. The government has also acknowledged that it would be obligated to offer refunds in the event of a Supreme Court loss—see, for example, Secretary Bessent’s comments on Meet the Press in September. And the Trump administration has repeatedly told the courts—as it did in May when arguing against an injunction blocking IEEPA tariff collections before the Court of Appeals for the Federal Circuit (CAFC)—that the government would provide refunds if the tariffs are ultimately invalidated:

The government said basically the same thing before the Court of International Trade (CIT) in December:

Just last month, the government reaffirmed its first CIT stipulation. Now that the president has lost, however, he and his team appear to be taking a different position. Hopefully they reverse course because fighting against refunds will be costly and unjust—especially for smaller American businesses that have done nothing wrong and are legally owed thousands of dollars or more from their government, yet they might lack the sophistication and resources to fight for what the government owes them.

What’s at Stake?

The amount of money at stake—unlawful duty collections pursuant to an IEEPA authority that the president never actually had—is massive. Data from Customs and Border Protection (CBP) show that IEEPA duty collections reached $133.5 billion through December 14, 2025 (Figure 1).

The Penn Wharton Budget Model forecasts that up to February, IEEPA tariff collections totaled $175 billion, while Bloomberg Economics says $170 billion. To put that figure in context, if all the illegally collected IEEPA tariffs funded their own new cabinet department, it’d be the seventh largest in the executive branch, just beating out the Department of Homeland Security (Figure 2). And interest owed on tariffs refunds would add another $10 billion or so.

Who’s Owed Refunds?

Under US law, duty refunds are paid to the importer of record (i.e., the party that filed the necessary entry documents with US customs authorities and initially paid all assessed import duties and taxes). Research has consistently shown that US importers and consumers bore the burden of US tariffs, not foreign exporters. This burden is the tariffs’ economic incidence, and studies vary on the share of the burden borne by various US entities and individuals. The tariffs’ legal incidence, however, is simple and clear: The importer of record bears the legal burden for paying tariffs—and is thus the one with a legal right to demand a refund today. According to the US government, more than 300,000 importers paid now-illegal IEEPA duties through mid-December 2025. Thus far, almost 2,000 of these importers have sued for refunds at the CIT.

While big companies such as Costco and FedEx get all the headlines, most importers are small or medium-sized US companies—and they paid a lot of IEEPA tariffs last year. A recent study from JPMorganChase (JPMC) analyzed proprietary transaction-level payments data from its midsize business clients to track likely tariff payments and international outflows. Monthly tariff payments by midsize firms tripled from April 2025—when Trump launched his “Liberation Day” tariffs—to year-end 2025. Duty payments for these firms totaled 15 percent of their international payments, equating to an effective average tax rate of roughly 15 percent on their imports. JPMC’s estimates are consistent with earlier calculations by the Center for American Progress finding that businesses of a similar size paid an average of $36,000 in tariff costs per month from April to September 2025—also three times as much as they paid from April to September 2024.

While economists are more interested in tariffs’ economic incidence (i.e., who ultimately “pays” the tariff), it’s only the tariffs’ legal incidence that matters regarding refunds—despite what some refund-resistant politicians are now saying. One US customs lawyer sums it up nicely (emphasis added):

Many observers express confidence that refunds will be available. However, CBP or the President might try to push back or delay the process. Some unattributed White House sources have suggested that to the extent importers passed on tariff increase to their customs, those importers lack standing to seek relied. This is a novel approach to put it mildly. Since the first Customs Act went into force in 1789, CBP has never looked beyond the importer of record when it comes to assessing the merits of a refund claim. More observers note that as a matter of law, since the tariffs were ruled to be a nullity from their inception, CBP had no right to collect the duty in the first place and refunds are in order without regard to any commercial dealings between importers and their downstream clients. Since the Court did not otherwise rule on this point it is hard to imagine how CBP can ignore 250 years of precedent regarding the availability refunds of wrongfully collected duties.

This approach is not only the law, but it also makes perfect sense. CBP processes more than 100,000 entries each day. Determining how US customs duties paid at the border on each entry filtered through supply chains and the US economy would be an impossible effort. For similar reasons, the US government also doesn’t consider economic incidence when refunding illegally collected corporate taxes, which—just like US tariffs—are also ultimately paid by consumers, workers, or shareholders. (Here’s a timely example of this corporate tax reality for FedEx, which is now seeking a tariff refund.)

The practical impossibility of considering economic incidence for tariff refunds probably explains why some refund-resistant US officials are now advocating for such an approach. They should be ignored.

The Case for Automatic Refunds

As Lincicome explained last year, CBP already has entry-level data for shipments against which it assessed IEEPA tariffs. In particular, CBP has instructed importers paying IEEPA tariffs to “report at least one Harmonized Tariff Schedule of the United States (HTSUS) Chapter 99 secondary classification related to the reciprocal tariffs,” providing it with a reasonably efficient and complete method to automatically search for and flag the unlawfully collected IEEPA tariffs. Using similar data in the past, CBP has had minimal difficulty issuing broad, automatic refunds, such as with the retroactive reauthorization of the Generalized System of Preferences program.

In theory, CBP could start an automatic refund process today for most of the entries subject to now-defunct IEEPA duties, returning money to importers in a matter of weeks. For “unliquidated” entries (i.e., shipments for which CBP has not yet calculated final import charges, including tariffs), CBP could simply recalculate tariff liability and remove the IEEPA duties. This could provide quick and easy re