If Trump loses his tariff lawsuit, America may have to refund businesses more than US$200 billion

President Donald Trump speaks during an event about the relocation of U.S. Space Command headquarters from Colorado to Alabama in the Oval Office of the White House, Tuesday, Sept. 2, 2025, in Washington. (AP Photo/Mark Schiefelbein)

The majority of the sweeping tariffs U.S. President Donald Trump imposed during his second term face one final litmus test that will determine whether he can continue to levy them – and also whether businesses are eligible for massive refunds.

That potentially dramatic turn in the tariff saga comes after a federal appeals court ruled on Friday that Trump unlawfully leaned on the International Emergency Economic Powers Act (IEEPA) to impose across-the-board duties on countries. Trump had used those powers to push import tax rates as high as 50% on India and Brazil – and as high as 145% on China earlier this year.

American businesses have paid over US$210 billion as of August 24 to cover the tariffs that US courts have determined are illegal. On Tuesday, Trump acknowledged that the court’s decision, if upheld by the Supreme Court, could result in the US Treasury having to “give back” tariff revenue collected.

Trump told reporters Tuesday that his administration is readying an appeal to the Supreme Court, perhaps as soon as Wednesday. He is urging swift action to keep his tariffs in place beyond the October 14 deadline the appeals court set for when its ruling will take effect.

“It’s a very important decision, and frankly, if they make the wrong decision, it would be a devastation for our country,” Trump said.

The nation’s highest court may decide it isn’t willing to hear the Trump administration’s appeal, instead deferring to the lower court’s decision. If that’s the case, American businesses could have that money back in their pockets. But it won’t necessarily be an easy or quick process.

It ain’t over

The Supreme Court will probably take on the case during the upcoming term, which begins next month; and the tariffs in question will likely remain in effect while the appeal is heard, said Ted Murphy, an international trade lawyer at Sidley Austin.

If the Supreme Court also finds Trump didn’t have the legal authority to impose tariffs under IEEPA, the administration will immediately have to cease those collections. However, it’s an open question how potential refunds would be handled, Murphy said.

It’s possible that the government could decide to refund the invalid tariffs to all importers who paid them, he said. Another possibility: “The government could also take the position that the court decision only applies to the named plaintiffs, thereby requiring importers to file their own court action.”

Or, what Murphy believes is most likely: “The government could also try to get the court to approve an administrative refund process, where importers have to affirmatively request a refund.”

Representatives from the Treasury Department, the government agency tasked with holding on to tariff revenue until its use is designated, declined to comment on how possible tariff refunds would be administered.

When a three-judge panel at the US Court of International Trade initially ruled in May that Trump’s use of IEEPA to levy tariffs were illegal, Thomas Beline, a trade attorney and partner at Cassidy Levy Kent, said he immediately began fielding calls from clients who asked him “When can I have my money back?” His response: Don’t hold your breath.

Instead, he’s been working with clients in advance of a final verdict to keep filing administrative protests with US Customs and Border Protection for tariff payments. This essentially prevents the entries from fully settling and could make it easier down the road to potentially get a refund, he said.

Many of his clients have been approached by investment firms trying to buy their stake in potential refunds.

It’s a bit of a gamble because, on one hand, many businesses making hefty tariff payments remain anxious for some immediate liquidity. They don’t want to wait for a refund that may not even happen. On the other hand, it would mean they aren’t able to get their full tariff payment refunded.

The downsides to tariff refunds

While businesses may be elated by the prospect of tariff refunds, it wouldn’t necessarily be a win-win for the economy.

The hundreds of billions of dollars of tariff revenue that Treasury has held on to in its general fund means the government has borrowed less money than it otherwise would have. Reversing the tariffs would necessitate more borrowing to pay its bills.

That could mean selling more Treasury bonds, which could push yields – and borrowing costs across the economy – higher.

An increase in the supply of bonds to cover the unanticipated shortfall in tariff revenue means the government could have to offer higher yields to attract investors.

The yield on the 30-year Treasury bond on Wednesday briefly hit 5%, its highest level since July, as investors demanded more compensation to hold US debt.

“If this ruling is upheld, refunds of existing tariffs are on the table, which could cause a surge in Treasury issuance and yields,” Ed Mills, a Washington policy analyst at Raymond James, said in a note.

Refunds could also spark concerns of runaway inflation, Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, told CNN.

“During the Biden administration, huge budget deficits plus loose monetary policies unleashed the inflation genie,” he said.

Under the Trump administration, the nation’s budget deficit has continued to grow, even with the influx in tariff revenue. Trump’s strategy to lower interest rates has been to attack the Federal Reserve, especially Chair Jerome Powell, and put the Board in his crosshairs by attempting to fire Fed Governor Lisa Cook and replace her with a Trump loyalist who could influence the rate-setting committee to cut borrowing costs.

If he’s successful in getting the central bank to lower interest rates while there are possibly massive tariff refunds being distributed, “that would refresh investor memories about the Biden years,” Hufbauer said, referring to higher inflation.