The Trump administration has expressed reluctance to issue refunds, even in light of last week’s Supreme Court decision regarding tariffs. This could prove challenging, particularly given the stance of the lesser-known federal court that will be involved in the case. Reports suggest the U.S. Court of International Trade was the first to scrutinize Trump’s extensive tariff directives, which were enacted without Congressional endorsement. This court seems to be doubtful of the authority Trump exerted over trade and is expected to manage most, if not all, cases related to refunds.
So, how did we get here? Trump declared the U.S. trade deficit a “national emergency” and believed he could utilize the International Emergency Economic Powers Act (IEEPA) to impose heavy tariffs. As markets took a hit, the government rolled back some of these taxes. Tariffs are currently at their highest levels in a long time—legally questionable, yes. While the trade deficit isn’t massive, it doesn’t seem to justify the extreme measures suggested by IEEPA. The Supreme Court ruled 6-3 last Friday, after the Trade Court—referred to as CIT—previously determined that the president overstepped his boundaries.
The ruling came from a panel that included a Trump appointee along with an Obama appointee and another judge appointed by Ronald Reagan. It’s hard to pinpoint any overt bias against Trump, but Reagan’s appointees are generally viewed as pro-free market and strict when it comes to honoring Congress’ authority over tariffs. Interestingly, the Trump appointee had also served under Obama.
A Washington-based lawyer involved in trade disputes remarked, “What happens next is still pretty unclear. There are already about 3,000 pending refund cases, and those will be handled by the same judges who earlier criticized Trump, and they don’t seem to be fans.” Legal experts suggest that White House lawyers may try to find loopholes in the ruling to delay the return of around $175 billion in duties paid by companies on imported goods.
The administration might pursue legal battles on a case-by-case basis, establishing a “final and non-appealable” standard that requires the entire case to conclude before any refund checks can be issued. Companies might feel it’s just not worth their trouble. Meanwhile, Trump is looking for alternative ways to reinstate tariffs.
It’s unclear how companies will navigate this legal landscape while dealing with potential backlash from the administration. They may need to demonstrate the specific amount of the tariff they actually absorb rather than just passing it on to consumers. Treasury Secretary Scott Bessent has ramped up his criticisms, equating tariff refunds to “ultimate corporate welfare.” The administration may seek to move these cases to a more favorable court setting.
My lawyer contact suggests, “There’s still an opportunity for appeal based on how the cases are combined, whether they’re pursued individually, or spread among different judges in CIT.”
This means companies weighing the option of seeking refunds will likely consult not just legal counsel but also accountants who can delve into the complex “time value of money.”
