How Trump's $150 Billion Tariff Brag Could Backfire

President Donald Trump boasts that his tariffs have raked in billions. There’s a chance his government will have to pay a lot of it back.

Several companies and states have challenged Trump’s use of an emergency law to impose some of his duties on individual countries, in a legal dispute that is likely to work its way up to the Supreme Court. As part of the case, companies have demanded the federal government pay them back for the tariff fees they’ve already paid out.

Trump’s own Justice Department has acknowledged in legal briefs filed with a U.S. Court of Appeals in recent months that if the tariffs were ruled unlawful, importers would be entitled to refunds, which Customs and Border Protection would likely process through standard administrative procedures.

That, trade and customs experts say, would be a logistical nightmare — both for the Trump administration and the companies seeking compensation. Perhaps more damaging for the president, it would also undercut one of the core arguments he’s made to justify his trade agenda: that his tariffs are bringing in unprecedented revenue that can help pay for his tax cuts and, one day, could replace the income tax, altogether.

The scenario is already alarming some Trump allies who strongly support his tariff policies, but also are pessimistic that the duties the administration imposed under emergency law will survive the Supreme Court.

“Two separate courts have already ruled strongly against them, so the idea that this is a sure thing doesn’t hold up,” said a person close to the White House. “The odds of this going against them are way higher than 50-50.”

Since Trump has returned to the White House, the U.S. government has raised tariff rates on a range of products and countries under two different trade laws. The president relied on a provision of the 1962 Trade Expansion Act to increase duties on cars, car parts, steel, aluminum and copper, which would not be affected by the current legal challenge. But a 10 percent "baseline" tariff and other levies on China, Canada, Mexico and, most recently, Brazil could be struck down if the justices agree with plaintiffs’ argument that the 1977 emergency law Trump is citing does not give him the power to impose tariffs — or that the trade deficit, fentanyl crisis and other situations he has cited do not constitute true emergencies.

So far, federal courts have sided with the plaintiffs in a pair of consolidated cases led by a New York wine importer and other importers hurt by the tariffs and joined by Democratic-led states. In May, a federal court ruled Trump’s tariffs exceeded the president’s authority granted under the 1977 emergency law. That was followed by a narrower ruling from the D.C. District Court in a separate case shielding two small businesses from the same tariffs.

Both decisions were later stayed, however, keeping the tariffs in place as the litigation works its way through the federal court system. Most experts believe it will eventually reach the Supreme Court.

“It’s entirely up to the [Supreme] Court to craft a remedy, and up to them how specific they want to be,” said Thomas Berry, director of constitutional studies at the free-market think tank Cato Institute, one of a number of organizations that submitted "friend of the court" briefs supporting the plaintiffs in the case.

Berry said the court may determine “some aspects of this are impossible to unwind,” but he and other trade experts interviewed for this article didn’t rule out the possibility that the court could order some form of repayment. While the lawsuit only seeks repayment of tariffs collected from the plaintiffs, five experts interviewed for this article said a ruling granting those damages would likely prompt a wave of similar legal challenges from other businesses and industry groups seeking reimbursement.

Individual companies charged the emergency tariff in recent months will likely need to wait until the appellate process concludes and the Supreme Court issues a ruling before they can effectively protest their tariffs and seek reimbursement if the decision is favorable. This process will likely be lengthy and require hiring trade attorneys.

And that could add up to a sizable sum the administration would have to figure out how to repay. It’s not clear what portion of the tariff revenue comes from the duties imposed on trading partners under emergency law, and how much has been produced by the tariffs on specific sectors, like cars. But combined, it exceeded $150 billion at the end of July, according to Treasury Department data. That’s nearly double the $78 billion netted over the same period last fiscal year.

“A huge number of tariffs have already been collected under [the emergency law] — on Mexico, Canada, China, fentanyl-related goods,” as well as via Trump’s 10 percent tariff on imports from countries around the world, said Jennifer Hillman, a professor at Georgetown Law School who served as a judge on the World Trade Organization Appellate Body. “And the administration has said clearly in court that if the tariffs are ruled illegal, they’ll pay the money back, with interest. So they’re not fighting the fact that the duties would have to be returned.”

“The real question is: how hard is it going to be for businesses to actually get that money back?” Hillman continued.

Repaying the tariffs would require identifying which companies are owed money, and how to administer payments — months after duties were collected, and at levels that dwarf tariff figures CBP typically handles.

Many companies also outsource customs paperwork, so refunds may first go to third-party brokers — requiring internal approvals before reaching the businesses that paid the tariffs.

“Better than losing the money forever, but still a nightmare for many,” said Dan Anthony, executive director of Coalition for GSP, an advocacy group, which has worked in the past with companies owed tariff refunds. “Even if the government piece of it runs smoothly, a company could still have extended refund delays as third-party vendors figure out processes to actually pay the money back.”

The existing process for protesting tariff fees allows companies to seek refunds within 180 days of payment. The Supreme Court could take up the case as soon as this fall, but a final decision might not come until next year, a timeline that further complicates repayments.

Repaying importers for the tariff fees also wouldn’t address the broader economic impacts of the higher duties, including on consumers. Contrary to claims from the White House that foreign countries are paying the duties, the fees are actually paid by companies or individuals importing goods from overseas, a cost that typically gets passed down to consumers in the form of higher prices — driving up inflation.

“With a tax refund, it’s pretty straightforward: you overpaid, you apply for a refund, and you get it back,” said Alan Wolff, a former deputy director-general of the WTO and former U.S. trade official. “But with tariffs, the cost gets passed along through the economy. Your customers paid it, or perhaps your suppliers shared the burden by lowering costs to you. So, figuring out who actually deserves economic benefit of a refund in hard.”