The Supreme Court struck down Trump’s tariffs. Now comes the hard work of issuing refunds

WASHINGTON– The Supreme Court on Friday struck down President Donald Trump’s biggest and boldest tariffs. But the judges left unanswered a $133 billion question: What will happen to the money the government has already collected in import taxes, now declared illegal?

Businesses are lining up for refunds. But the path ahead could prove chaotic.

When the smoke clears, trade lawyers say, importers will likely eventually get their money back. “It’s going to be a bumpy ride for a while,” said commercial lawyer Joyce Adetutu, a partner at Vinson. & Elkins Law Firm.

The refund process will likely be conducted by a combination of U.S. Customs and Border Protection, New York’s Special Court of International Trade and other lower courts, according to a memo to clients from attorneys at the Clark Hill law firm.

“The amount of money is significant,” Adetutu said. “The courts are going to have a hard time. The importers are going to have a hard time.”

Still, she added, “it’s going to be very difficult not to have some sort of repayment option,” given how decisively the Supreme Court rejected Trump’s tariffs.

In its 6-3 opinion Friday, the court ruled that Trump’s attempt to use an emergency powers law to enact the levies was invalid. Two of the three justices appointed by Trump joined the majority in overturning the first major element of his second-term agenda submitted to them.

At issue are the double-digit tariffs that Trump imposed on nearly every country in the world last year by invoking the International Emergency Economic Powers Act of 1977 (IEEPA). The Supreme Court ruled that the law did not give the president the power to tax imports, a power that belongs to Congress.

The US customs agency has 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 on the cost of tariffs; it is more likely that this sum will go to the companies themselves.

In a dissenting opinion, Justice Brett Kavanaugh criticized his colleagues for dodging the issue of repayment: “The Court says nothing today about whether, and if so how, the government should return the billions of dollars 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 repayment process was likely to be a ‘mess’.”

“I guess this will have to be litigated over the next couple of years,” Trump told reporters at a news conference Friday, during which he denounced the court’s decision and said he was “absolutely ashamed” of some judges who ruled against his tariffs. “We will end up in court for the next five years.”

Ending IEEPA tariffs could help the economy by easing inflationary pressures. Tariff refunds – like other tax refunds – could boost spending and growth. But the impacts will likely be modest.

Most countries still face high tariffs from the United States on specific sectors, and Trump intends to replace IEEPA levies with other options. The refunds that will be issued will take time to implement – ​​12 to 18 months, estimates TD Securities.

The U.S. Customs Agency has a process for refunding duties when importers can prove there was an error. The agency could try to rely on the existing system to reimburse Trump’s IEEPA tariffs, said trade attorney Dave Townsend, a partner at the Dorsey law firm. & Whitney.

And there is precedent for courts to make arrangements to reimburse companies in commercial cases. In the 1990s, courts struck down as unconstitutional a port maintenance tax on exports and established a system allowing exporters to seek reimbursement.

But American courts and customs have never had to deal with a situation like this: thousands of importers and tens of billions of dollars at once.

“Just because the process is difficult to administer does not give the government the right to withhold fees that were collected illegally,” said commercial attorney Alexis Early, a partner at the law firm Bryan Cave Leighton Paisner.

Ryan Majerus, Partner at King & Spalding and a former U.S. trade official said it was unclear how the government would respond to the massive demand for refunds. It could try to streamline the process, perhaps creating a special website where importers could request their refunds.

But Adetutu warns that “the government is well placed to make this as difficult as possible for importers. I see a world where they shift as much responsibility as possible onto the importer”, perhaps forcing them to go to court for refunds.

Many companies, including Costco, Revlon and canned seafood and chicken producer Bumble Bee Foods, filed lawsuits seeking refunds even before the Supreme Court ruled, essentially seeking to be at the front of the line if the tariffs were overturned.

There will likely be more legal battles to come. Manufacturers could, for example, claim a share of refunds given to suppliers who raised the price of raw materials to cover customs duties.

“We could see years of ongoing litigation in multiple jurisdictions,” Early said.

However, it is unlikely that consumers will benefit from a refund windfall. The higher prices they had to pay would likely be difficult to attribute to a specific tariff. Should they still ask for refunds? Early did not advise wasting money on legal fees, but said, “In America, we have the ability to sue for anything we want. »

Illinois Gov. JB Pritzker, a Democrat and Trump antagonist, is demanding reimbursement on behalf of his state’s 5.11 million households. In a letter to Trump released by Pritzker’s gubernatorial campaign, the governor said the tariffs have cost every Illinois household $1,700, or $8.7 billion. Pritzker said failure to pay would result in “additional action.”

Nevada Treasurer Zach Conine has submitted a request to pay the federal government $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 recover every dollar the Trump administration takes from Nevada families,” Conine said in a statement.

___

AP writers Lindsay Whitehurst and Christopher Rugaber in Washington, Jessica Hill in Las Vegas and John O’Connor in Springfield, Ill., contributed to this story.