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 relief to a large set of importers, given that as of mid-December 2025, 19.2 million of 34 million entries subject to IEEPA tariffs remained unliquidated. Upon liquidation of the entries, no IEEPA duties would be owed or paid.
CBP could also offer quick relief for many liquidated entries because the agency can voluntarily move to “reliquidate” entries within 90 days of liquidation and then refund duties via the above process. Given that liquidation typically takes 314 days, this grace period means that CBP could unilaterally issue IEEPA refunds to any qualifying shipments prior to March 15, 2026—that is, 404 days after the earliest IEEPA tariff, China fentanyl, became effective on February 4, 2025.
This is not a perfect solution. For starters, CBP lacks the authority to issue refunds for many “informal” entries on which IEEPA duties have been paid, as these entries liquidate as soon as the importer pays. CBP might also face other difficulties for certain formal entries, depending on the imports at issue and the paperwork submitted. But these are exceptions to a simple refund rule that would return tens of billions of dollars to US importers in a fair and timely manner. And every day that the Trump administration waits to implement this system, it risks encountering new hurdles (e.g., reaching the time limit for voluntary reliquidation) that would prevent the government from disgorging itself of ill-gotten tax revenues.
Maybe that’s the point.
What Might the Nonautomatic Process Look Like?
Assuming that the government doesn’t start issuing blanket, automatic duty refunds, trade attorneys estimate it could take as much as 12 to 18 months before importers see any of the money that the government owes them. The exact process, however, remains unclear at this stage—and depends on whether the government fights importers’ requests for refunds in court and via the typical administrative process for duty refunds.
If the government doesn’t fight (but also doesn’t choose the automatic approach), the process would be straightforward for unliquidated entries. Importers would file a Post Summary Correction (PSC) to request that CBP refund the estimated IEEPA duties that they deposited with their shipments. Importers would then wait for the PSC process to conclude and for the entry to liquidate at the lower (ex-IEEPA) duty rate. For liquidated entries, importers can file a “protest” within 180 days of liquidation, seeking reliquidation at the lower duty rate.
If CBP resists the importers’ requests, a key question will be whether importers can sue for refunds directly at the CIT or must go through the CBP protest process before doing so. When the CIT denied a motion for a preliminary injunction by importer AGS Company Automotive Solutions in December 2025, the court cited precedent from the CAFC to suggest that importers could eschew the CBP protest process and instead file suit directly at the CIT if the Supreme Court invalidated the IEEPA tariffs. The Department of Justice also assured the CIT that the government would not object to the court ordering the reliquidation of the entries at issue and would subsequently refund all unlawfully assessed duties with interest.
On the other hand, courts could rely on prior Supreme Court decisions to rule that importers must first exhaust administrative remedies before suing in federal court and thus must file protests with CBP before seeking a remedy at the CIT. Cato adjunct scholar Joshua Claybourne suggested that importers whose entries have already been liquidated by CBP could request accelerated disposition of their protest, which would require CBP to review the protest within 30 days. (Under a standard timeline, CBP has up to two years to review a protest from its filing date.) CBP’s failure to do this would result in the denial of the protest, allowing importers to go to the CIT more quickly. Requiring importers to exhaust the CBP protest process before going to court could significantly delay refunds, given that more than half of all entries subject to IEEPA tariffs remained unliquidated as of December 2025.
Finally, it’s unclear whether courts will mandate refunds for importers who do not file or join lawsuits. In its decision in V.O.S. Selections, Inc. v. Trump, the CIT granted a universal injunction, thus barring the collection of IEEPA duties for all importers. However, the CAFC vacated and remanded this judgment in light of the Supreme Court’s ruling in Trump v. CASA, Inc., which limits universal injunctions only to the extent “necessary to provide complete relief to the plaintiffs.” As the Supreme Court’s opinion in the IEEPA tariffs case did not address refunds, the CIT might limit IEEPA tariff refunds to only the named plaintiffs in the refund cases (individually or, more likely, in a single consolidated case). A class-action lawsuit is also possible, though it may prove challenging.
Conclusion
Automatically refunding unlawfully collected IEEPA tariffs is the right thing to do, likely to be politically popular, and feasible today for most imports. It would only be a logistical nightmare if the Trump administration chooses to make it one—a choice the administration appears to be considering. If the president decides to go it the hard way, it’ll fall to the judicial branch to hold the executive to his word or for Congress to mandate blanket relief. Legislation on the latter has already been offered. If it doesn’t soon become law, Democrats have promised to make tariff refunds a major issue in the fall midterm elections.
In the absence of class-action or universal relief, smaller US businesses will be disproportionately harmed. Even the easiest administrative process—PSCs, protests, etc.—would be administratively difficult for firms that lack resources and legal sophistication. (It’d also be a slog for CBP to process all this paperwork in a timely and accurate manner.)
If litigation is required, the burden becomes exponentially worse—especially if courts rule that importers must file protests with CBP at first instance. In this case, thousands of American companies would be shut out from reclaiming money that the government illegally extracted from them. A back-of-napkin estimate suggests that because of these practical limitations, as much as $30 billion will never be refunded—a massive and unjustified windfall for a US government that recklessly implemented tariffs pursuant to an “emergency” law that had never been used to impose such taxes and that few legal experts believed clearly authorized them.
Even for companies that can and do fight it out in court, there will be significant costs that are again disproportionately borne by smaller firms. Importers have finite capital tied up in customs bonds and high-interest loans to cover the costs of IEEPA tariffs—tariffs, again, that are now unquestionably illegal. The more that litigation drags on, the more money businesses must devote to these nonrefundable costs—money that they can’t devote to their workers, production, or shareholders. These costs, along with uncertainty surrounding tariff refunds, is driving some smaller US businesses to sell the rights to their refunds to Wall Street speculators at pennies on the dollar—losses, the Wall Street Journal notes, that big businesses will likely avoid because they “can foot the legal bills and will be more likely to wait for big payouts.”
Reasonable minds can differ about whether lawful taxation is “theft”; in this case, however, there’d be no question.