Small U.S. Businesses Challenge Trump’s Tariffs
While major retailers like FedEx and Costco are pursuing refunds related to President Trump’s tariffs, smaller U.S. businesses, significantly affected by these tariffs, are also stepping up their efforts, according to recent reports.
On Tuesday, shortly after the Supreme Court’s decision to strike down the tariffs, FedEx revealed it would incur $1 billion in tariffs by 2025, a significant 16% impact on its revenue. In contrast, Basic Fun, known for products like Tonka Trucks and Care Bears, reported that the $7 million in tariffs it faced last year slashed its expected profits by 65%.
A toy company based in Boca Raton, Florida, filed a lawsuit on February 13 against U.S. Customs and Border Protection, seeking a refund. The amount at stake is $200 million, based on court documents.
“We’re anticipating how this will unfold, but we hope to be next in line for a refund,” said Jay Foreman, CEO of Basic Fun.
The Liberty Justice Center, a nonprofit that successfully argued the case in front of the Supreme Court, submitted a motion on Tuesday for the U.S. Court of Appeals and the Court of International Trade to initiate refunds. A federal appeals court ruling mandates the White House to respond to this complaint by Friday.
Sarah Albrecht, director at the Liberty Justice Center, indicated the administration might be gearing up for a prolonged legal battle. She mentioned that the administration could hold off on taking action until March 17, when the Supreme Court is expected to issue a final decision.
President Trump expressed frustration, stating, “We’re going to spend the next five years in court.” Treasury Secretary Scott Bessent commented, “Let’s see if we have to pay it back. Let’s see how long it will take.” According to an agency analysis, over 1,800 out of 301,000 companies that paid the tariffs have filed lawsuits to recover more than $130 billion in penalties.
“They’re suggesting a fight, but I’m unsure how they would proceed,” Albrecht remarked, comparing the situation to questioning whether bank robbers can keep stolen money.
White House officials were unavailable for comment. Eric Smithweiss, a trade attorney representing several refund-seeking companies, expressed concerns over the uncertainty surrounding the tariff refund process, which, he noted, was not helped by the president’s lack of commitment to refunds.
VOS Selections, a wine importer from New York City and lead plaintiff in the Supreme Court case, does not expect to recover the approximately $150,000 it paid in customs duties. Victor Schwartz, the company’s owner, explained that they filed suit because they believed they had a better chance of recovering their funds, but felt their payments were “gone forever.”
Schwartz mentioned that VOS Selections had to cut inventory by 25%, which impacted cash flow and prevented expansion into new products. Similarly, Basic Fun instituted a hiring freeze, with employees receiving lower or no salary increases, according to Foreman. He described the situation as a “trickle-down tariff.”
However, not all businesses are eager to challenge the government. Some fear potential backlash from the administration. John Vecchione, a lawyer with the New Civil Liberties Union, pointed out that some companies are hesitant to pursue refunds, thinking it could anger the administration.
In a notable legal action, Echelon, a maker of exercise equipment, was sued by competitors over tariffs. CEO Lu Lenting stated they are keeping a close eye on developments but have no plans to sue the government, acknowledging the significant financial stakes involved.
Albrecht emphasized that companies should not have to resort to lawsuits for rightful refunds, noting that U.S. Customs and Border Protection has the capability to issue refunds without litigation.
In the past, a landmark Supreme Court case in 1998 resulted in US Shoe Corp. winning a ruling that absolved it from paying port taxes. Exporters were able to claim $730 million from the government over the following two years. During that time, a claim resolution procedure was established for exporters.
Many smaller businesses claim that the tariffs are hindering their revenue growth, limiting their ability to import more products. For instance, Sarah Wells of Fairfax, Virginia, and Busy Baby of Oronoco, Minnesota are in the midst of lawsuits seeking to recover $40,000 and $50,000, respectively, in customs duties. Wells noted that her company laid off half its staff after suffering a $500,000 loss due to tariffs.
“Last year was the first time in 14 years that we didn’t produce anything because we couldn’t afford to bring products into the country,” Wells lamented. In March of last year, her manufacturing operations were temporarily halted until year-end.
Busy Baby’s Beth Beinike faced severe financial pressure, taking on credit card debt and drawing from her retirement savings to sustain her baby products business. She recalled her first customs bill of $32,000, which forced her into a tough settlement. “I took on a lot of debt to keep the lights on,” she shared.
Both businesses aimed to make substantial gains in 2025, with Busy Baby securing agreements with retail giants like Target and Walmart for its baby mats after appearing on Shark Tank. Meanwhile, Mr. Wells transitioned from a role at a Chinese manufacturer to a new venture in Cambodia, only to face new tariffs imposed under the International Economic Emergency Powers Act.
“This year kicked off promisingly. I had just placed our first factory order in Cambodia when the 49% IEEPA tariff hit,” Wells explained. “Since then, it’s been a rollercoaster ride.”
