Legal Battles Over Tariffs: Implications for the U.S. Economy

WASHINGTON (AP) — President Donald Trump has frequently touted the revenues generated by the tariffs imposed on imports from around the globe, framing them as a crucial source of income for the U.S. Treasury. “We have trillions of dollars coming into our country,” he emphasized on Wednesday. “If we didn’t have tariffs, we would be a very poor nation, taken advantage of by every other nation.”

Potential Reversal of Tariff Revenues

However, two separate courts have recently determined that some of these significant tariffs may be illegal. Should the Supreme Court affirm this ruling, it could lead to a substantial mandate for the federal government to refund many of the tariffs already collected from importers.

Trade attorney Luis Arandia of the law firm Barnes & Thornburg stated, “We’re talking about hundreds of billions of dollars potentially in refunds affecting thousands and thousands of importers. Unwinding all that will be the largest administrative effort in U.S. government history.”

Impact on Ordinary Americans

Ordinary Americans, who have already been affected by higher prices for various products due to these tariffs, are unlikely to see any benefits from potential refunds. Rather, those financial recoveries would likely be directed to the companies that initially bore the burden of the tariffs.

Additionally, these refunds would disrupt the expected revenue flow that has been earmarked to assist in funding the substantial tax-cut bill signed on July 4, which the president warns could “literally destroy the United States of America.”

The Legal Grounds of Tariff Implementation

At the heart of the issue are tariffs imposed under the 1977 International Emergency Economic Powers Act (IEEPA). Trump applied this law to target nearly every nation, arguing that the nation’s persistent trade deficits constituted a national emergency. He also aimed specific tariffs at Canada, China, and Mexico, to address the illegal flow of drugs and immigration.

Judicial Developments

A specialized federal trade court in New York ruled in May that the president exceeded his authority by bypassing Congress to impose the IEEPA tariffs. Subsequently, the U.S. Court of Appeals for the Federal Circuit upheld this decision but instructed the lower court to reconsider if there could be any legal remedy that stops short of voiding the tariffs entirely.

The appellate court has urged a pause on their ruling until mid-October, providing the administration with time to appeal to the Supreme Court. Solicitor General D. John Sauer requested the court to hear the case with arguments expected in early November.

What Refunds Might Look Like

If the Supreme Court invalidates the IEEPA tariffs, importers may become eligible for refunds. According to the U.S. Customs and Border Protection agency, over $72 billion in IEEPA tariffs had been collected through August 24.

Ted Murphy, co-leader of the international trade practice at the Sidley Austin law firm, explained, “It’s a question of what you’re going to have to do to get the refund.” He outlined possible scenarios for obtaining refunds: automatic reimbursements by the government, an administrative application process, or even individual court cases lodged by importers.

Precedents and Challenges Ahead

Historically, courts have established systems for companies to recover funds in trade disputes. In the 1990s, for instance, a court deemed a harbor maintenance fee on exports unconstitutional and devised a refund system for exporters.

One challenge in this case is the unclear stipulation regarding the payment of interest on refunds, as was set in previous scenarios. Furthermore, the Trump administration has signaled its reluctance to issue refunds. In August, Trump expressed his concerns on social media, equating potential refunds with another Great Depression.

Brent Skorup, a legal fellow at the Cato Institute, predicts complications in the refund process should the administration lose its appeal, stating, “I think there will be a lot of litigation about the nature of refunds and who’s entitled to them.” He anticipates the administration will present numerous objections.

Importance of Record Keeping

To ensure they can successfully claim any refunds, Arandia urges importers to maintain meticulous records of their transactions. However, the unpredictable nature of Trump’s tariff policies—often characterized by abrupt announcements, delays, and alterations—adds an additional layer of complexity.

Ultimately, while tariffs are paid by importers, these costs usually trickle down to consumers in the form of higher prices, leaving ordinary Americans with no recourse for refunds on their inflated expenses.

“It’s the importer of record that is legally liable for paying tariffs and duties,” Arandia noted. “They would be the only one to have standing to even get that money back.”