The United States Supreme Court has ruled against the administration of President Donald Trump, casting doubt on the refund process for approximately $175 billion collected through global tariffs imposed on various trading partners. On June 16, 2023, in a decisive 6-3 ruling, Chief Justice John Roberts upheld a lower court’s decision, stating that the president exceeded his authority under the International Emergency Economic Powers Act (IEEPA).
Despite the ruling, the Supreme Court did not provide specific guidance on how the federal government would handle refunds for the tariffs collected in recent months. Justice Brett Kavanaugh, in his dissent, cautioned that the refund process could become complex and messy, stating it could present significant practical challenges. The case is now set to return to the Court of International Trade, which will oversee the refund process.
Legal Challenges and Impacts on Businesses
Over 1,000 lawsuits have already been filed by importers in this court seeking refunds, with many more expected to follow. Legal experts anticipate that importers will need to apply for refunds individually, a process that may disproportionately affect small businesses burdened by the tariffs. According to Greg Shaffer, a law professor at Georgetown University, the government is unlikely to voluntarily refund the money it collected unlawfully. Instead, he expects that importers will be required to navigate various procedures to request refunds, which could lead to delays and additional costs.
“The largest companies may have the resources to pursue their refunds effectively, but smaller importers may find it not worth the hassle,” Shaffer said. This situation highlights the broader implications of the tariffs on businesses of varying sizes, particularly those that have been adversely affected.
Trump’s Continued Tariff Strategy
Even after the Supreme Court’s decision, many tariffs remain intact. Trump previously utilized Section 232 of the Trade Expansion Act of 1962 to impose targeted tariffs on products such as steel, aluminium, and automobiles. Following the ruling, Trump announced plans to impose a new 10 percent global tariff for 150 days, using authority from Section 122 of the Trade Act of 1974. This new duty would be in addition to existing tariffs and does not require an extensive procedural process.
Wendy Cutler, vice president of the Asia Society Policy Institute, stated that trading partners were aware of the risks associated with the IEEPA’s use. She emphasized that negotiations with Washington were made under the assumption that different statutes would be utilized to maintain tariffs. The administration still has the option to pursue tariffs against China under an ongoing Section 301 investigation related to the Phase One trade agreement.
Looking ahead, Trump is expected to engage in trade discussions with Chinese President Xi Jinping next month. Shaffer noted that while the administration has various options to impose tariffs, any new tariffs would not apply retroactively to duties already paid.
Congressional Response and Future Implications
The Supreme Court ruling has increased pressure on Congress to clarify the extent of executive trade authority. Chief Justice Roberts stated that the president must demonstrate clear congressional authorization for imposing tariffs. This ruling has prompted responses from both sides of the aisle in Congress. House Speaker Mike Johnson noted that Congress and the administration would need to determine the best path forward in the coming weeks.
In contrast, Senate Democratic Leader Chuck Schumer welcomed the ruling, suggesting it would provide relief to families and small businesses affected by the tariffs. The complexities surrounding the refund process raise significant questions, especially regarding whether the funds collected have already been spent and how Congress will facilitate repayment to importers.
Babak Hafezi, a professor of international business at American University, highlighted the challenges ahead. “If the funds have been spent, Congress will need to reallocate money, determine how much is owed to importers, and create a mechanism for repayment,” he said. “This is not a situation that will be resolved quickly; it could take years, potentially even a decade, to untangle.”
The implications of this ruling and the ongoing tariff policies will continue to shape the landscape of international trade and domestic economic conditions in the United States.
