Bosses should not hold their breath for a Trump tariff refund

For businesses the world over the past year has been marked by the ever-changing threat of President Donald Trump’s tariffs. On February 20th the ground moved yet again—this time in their favour. America’s Supreme Court struck down the import duties imposed under the International Emergency Economic Powers Act (IEEPA), including Mr Trump’s “reciprocal” tariffs as well as levies slapped on Canada, China and Mexico for allegedly aiding the smuggling of fentanyl into America.

Now businesses want their money back. Goldman Sachs, a bank, estimates the overall amount paid under IEEPA tariffs at about $180bn, equivalent to roughly 5% of the profits companies generated in America last year. Investors, however, seem unconvinced. The Supreme Court’s ruling has not sent share prices soaring for companies hit hard by import levies. That is partly because Mr Trump has implemented a new global tariff of 10%. But it is also because the process for claiming refunds will be slow and politically fraught.

For many companies the cost of the tariffs has been sizeable. Since April the amount importers pay the Treasury each month has jumped from around $6bn to $30bn (see chart). Nike, a sportswear brand, said last year that its annual toll from the import duties would be $1.5bn. Apple, the iPhone-maker, has run up a bill of over $3bn in the past three quarters. America’s big three carmakers—Ford, GM and Stellantis (whose biggest shareholder, Exor, part-owns The Economist’s parent company)—have also grumbled about the levies costing them billions of dollars.

Much of that money, however, may not be returned. For a start, many tariffs, including sector-specific ones on things like cars or aluminium, were imposed under different statutes with a more robust legal basis. Tariffs under IEEPA amount to around two-thirds of the import duties paid since October.

Moreover, the refund process will be complicated. The Supreme Court did not tackle the subject in its decision. That has left the matter to America’s Customs and Border Protection (CBP) agency and the Court of International Trade (CIT).

When a business imports a good, it typically pays an estimated duty. The cbp then has a year to review and amend the estimate, a procedure known as “liquidation”. Companies subsequently have six months to appeal against the cbp’s adjustment. Because the earliest IEEPA tariffs first took effect last February, lots of claims have either not been liquidated or are within the appeal window. Many businesses will therefore try to get their refund using the agency’s existing systems.

But some fear that the Trump administration will use litigation to try to block or delay refunds through the CBP. That is why over the past year some 1,800 companies—including Goodyear, a tyre-maker, and Costco, a retailer—had filed suits at the CIT to protect their right to a refund should the Supreme Court overturn Mr Trump’s tariffs.

Even if the CBP is made to hand money back to businesses, rebates will be slow to arrive. The administrative burden of processing the refunds will be enormous owing to their “scale and scope”, notes Steve Engel of Dechert, a law firm. Another lawyer notes that unliquidated tariff claims can only be corrected one by one using the CBP’s current system. Some companies have hundreds of thousands of claims.

An added complexity is that companies passed on much of the burden of the levies. By the end of last year around 60% of the cost of Mr Trump’s tariffs was being covered by consumers through higher prices, according to Goldman Sachs. Gavin Newsom and J.B. Pritzker, two Democratic governors and presidential hopefuls, have both demanded that refunds be paid to households. Bosses hoping for a refund should not hold their breath. ■