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The Supreme Court's decision invalidating President Donald Trump's "emergency" tariffs was a landmark victory for the rule of law. But it leaves a huge economic question unresolved: What happens to the roughly $175 billion that the federal government illegally collected from US companies?
The answer could be simple, fast and equitable - and keep a promise the Trump administration has already made. Unfortunately, it appears to have had a change of heart, to the detriment of thousands of small businesses that deserve restitution.
A quick recap: The court held that the International Emergency Economic Powers Act (IEEPA) doesn't allow the executive branch to impose tariffs of any kind, forcing Trump (and all future presidents) to rely on other statutes that do provide such authority. Shortly after the ruling, the president issued an executive order terminating all IEEPA-based tariffs that the administration had enacted since early 2025. Collections ceased on Monday. The administration also moved to replace the IEEPA tariffs with new ones under other laws - actions that will undoubtedly raise new questions and litigation.
The most immediate question, however, hangs over the duties improperly collected from importers under IEEPA. According to US Customs and Border Protection, IEEPA collections totaled $133.5 billion as of Dec. 14, 2025, and economists at the University of Pennsylvania estimate that the sum has grown to $175 billion since. Either way, it could be the largest mandated return of tax revenue in American history - and the Supreme Court's majority opinion said nothing about it.
There is an obvious way forward. The federal government and courts have long recognized that when tariffs are later invalidated, the government must refund collections with interest. Customs officials regularly process duty refunds; US lawyers regularly request them; and even large, retroactive refunds have been automatically issued in the past, meaning importers did almost nothing to get their money back.
In this case, the government could issue blanket administrative refunds that go through CBP's existing system. Importers have clear records. Entries are itemized, with special codes assigned to IEEPA tariffs, and almost everything is paperless. For the vast majority of entries, the math is straightforward. The administration also has already told courts - repeatedly - that plaintiffs who paid IEEPA tariffs would receive refunds following a final, unappealable court decision. Treasury Secretary Scott Bessent acknowledged in September that the administration would have to issue refunds if the court ruled against it.
That was then. Now, both the president and the Treasury secretary have indicated that they won't refund the money without a fight, and that the process could take years. The Department of Justice has gone quiet, and as of this writing, CBP has issued no refund guidance whatsoever.
So the most likely next steps on tariff refunds will involve litigation - maybe lots of it. As of Monday, nearly 2,000 importers, including Fedex, had filed lawsuits at the Court of International Trade, the specialized federal court that handles customs disputes. Last month, the CIT confirmed that it has the authority to mandate refunds, and that it will hold the government to its word that it would not oppose such orders. Thousands more lawsuits are sure to arrive in the coming days.
There are roughly 600,000 US importers owed money by the government, however, and many of them lack the resources and knowledge to file suit. They might be able to join a class-action lawsuit, but that's not a sure thing. All importers also will have to navigate CBP bureaucracy, and there are already rumors that the administration might make the process as slow and difficult as possible, burying businesses under mountains of paperwork.
Even in the best-case scenario - a streamlined CIT process, cooperative CBP, no government appeals - trade attorneys estimate it will take 12 to 18 months before importers see actual money.
In either scenario, the outcome would be remarkably unfair. Large corporations have the resources to fight for a refund and wait for it to arrive - and they are also more likely to have the clout to have passed on tariff costs to their customers. Smaller companies have none of these advantages and could spend more on legal fees than they're owed by the government. Making the refund process difficult is effectively a tax on small businesses and a subsidy to larger ones.
If the administration continues to fight refunds, Congress should act, passing legislation that mandates a clean, automatic refund process - similar to what Congress has repeatedly done when retroactively reauthorizing the Generalized System of Preferences. Democrats offered such a bill last Friday. A veto-proof vote margin is unlikely, but Republicans would be wise to consider that Democrats are gearing up to feature the administration's tariff adventurism in their midterm messaging.
Even if Congress does mandate a clean refund process, the system won't be perfect. Only importers of record have a legal claim to refunds, and tariff costs borne by these firms have in many cases been passed through to other companies or consumers, in the form of fees, surcharges or higher prices. Some companies, meanwhile, have gone bankrupt from the tariffs and can't make any claim at all. It's possible that US companies flush with a refund windfall will offer their customers some tariff relief, but widescale price declines are unlikely. Businesses are always reluctant to lower prices, and Trump's replacement tariff regime gives them a perfect excuse not to.
How refunds eventually filter through the economy will make for a fascinating economics experiment - assuming, of course, that it ever happens. And to the extent US consumers are angry that they ended up on the losing end of Trump's failed tariff experiment, that's what elections are for.
Scott Lincicome is an economist with the Cato Institute. He specializes in domestic policy and international trade.
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