The United States Supreme Court is poised to deliver a landmark verdict this Friday that could unravel former President Donald Trump's use of emergency powers to impose global tariffs, setting the stage for a complex and potentially years-long refund battle approaching $150 billion. Companies, customs brokers, and trade lawyers across the globe, including many with significant Indian trade interests, are bracing for the fallout.
The Legal Challenge at the Heart of the Dispute
The core of the legal battle revolves around Trump's unprecedented application of the International Emergency Economic Powers Act (IEEPA) of 1977. Historically used to sanction foreign adversaries or freeze assets, Trump became the first US president to leverage this statute for imposing tariffs. During oral arguments in November, justices from both conservative and liberal wings expressed deep skepticism, raising questions about whether IEEPA grants such authority and fueling expectations that the tariffs may be struck down.
According to data from US Customs and Border Protection (CBP), tariffs levied under this emergency law generated an estimated $133.5 billion in collections between February 4 and December 14. Extrapolating from average daily collections, Reuters estimates the total has now climbed close to the staggering $150 billion mark.
Preparations and Pessimism: The Road to Refunds
In a move that has sparked cautious optimism among importers, CBP recently announced a technical shift. Starting February 6, tariff refunds will move entirely to electronic distribution via its ACE portal, moving away from paper cheques. While not a fully automated system, this signals administrative readiness. "It does kind of signal that Customs is fully prepared to move forward with refunds, if the Supreme Court does, in fact, rule that way," noted Angela Lewis, global head of customs at Flexport.
However, the path to repayment is fraught with uncertainty. CBP and the US Treasury declined to comment on handling an adverse ruling. Treasury Secretary Scott Bessent hinted that any loss of tariff revenue could be offset through other legal means, stating a ruling against the tariffs would mean "the president loses flexibility to use tariffs, both for national security, for negotiating leverage."
The tariffs were imposed through two key actions: "reciprocal" tariffs on most US trading partners in April, citing trade deficit emergencies, and earlier tariffs on China, Canada, and Mexico over fentanyl trafficking concerns.
Corporate Anxiety and the Secondary Market for Claims
Despite the potential scale of repayments, businesses fear that a Supreme Court victory will not automatically open the government's coffers. "It's not in the government's DNA to give back money. And Trump would not want to give back money," said Jim Estill, CEO of Danby Appliances, which has paid about $7 million in duties.
This uncertainty has led many companies to take pre-emptive legal action against CBP. Major firms like Costco, Bumble Bee Foods, Revlon, and Kawasaki Motors have filed lawsuits, with Costco noting that importers are "not guaranteed a refund" without specific judicial orders.
A telling sign of the pervasive doubt is the emergence of a fast-growing secondary market. Smaller businesses, desperate for liquidity, are selling their future refund claims to hedge funds at steep discounts. Toymaker Kids2, for instance, received just 23 cents on the dollar for reciprocal tariffs and a mere nine cents for fentanyl-related duty claims.
Jay Foreman, CEO of Basic Fun!, which paid $6 million in tariffs, expects the administration to "obfuscate or delay" payments even if ordered. "The last thing the American public wants to know is a bunch of slick Wall Street or predatory-lender types will come and make a fortune off all this," he remarked.
Advisers are urging all affected companies to act swiftly and maintain meticulous records. "The people that get their claims in early and have them done correctly are the ones who are going to reap the benefits the fastest," advised Pete Mento, a trade advisory director at Baker Tilly. "And, knowing the way the processes work in Washington, it could be years before you see that money." The final outcome now rests with the Supreme Court, with its ruling set to trigger a monumental administrative and legal scramble in the world of international trade.
