Will consumers and businesses ever see refunds for tariffs?

The Supreme Court has ruled that President Donald Trump does not have the power to impose sweeping tariffs on other countries, which means the government is supposed to refund billions to U.S. companies. Some companies have pledged to provide refunds or suggested they will offer lower prices, but consumers who expect a refund will likely be disappointed, with legal experts saying that any lawsuits they file will be challenging to win. 

Businesses are more likely to win the suits they file, according to experts, but it may take a long time to see that money given the Trump administration’s resistance to providing refunds. 

During his second administration, President Trump has imposed tariffs ranging from 10% to 50% on countries around the world. Tariffs are a tax that U.S. companies, not other countries, have to pay. To compensate for that lost revenue, they can either raise prices or eat the costs. American families have each paid an average of more than $1,700 in tariff costs over the past year, according to a February report from the U.S. Senate’s Joint Economic Committee. 

More than $175 billion could be subject to refunds due to the Supreme Court’s reversal, according to an estimate from the Penn Wharton Budget Model. 

Not all tariff money will be refunded, however. The Supreme Court has struck down tariffs that Trump has imposed under the 1977 International Emergency Economic Powers Act. Those include the reciprocal tariffs, aimed at addressing trade imbalances, and the fentanyl tariffs, which were aimed at curbing the flow of that drug into the U.S.

And this money is only supposed to go back to the people who imported these products. 

"The tariff is paid by law by somebody called the importer of record, and so that's the person who literally pays the government the tariff and that's the person who will literally be entitled to any refunds," said Timothy Meyer, a professor at Duke University School of Law, in an interview with Marketplace last year.

Some companies have pledged to return the tariff refunds they receive, like FedEx and Cards Against Humanity. Costco’s CEO says the company will aim to return any tariff refunds it receives in the form of “lower prices and better values.” 

Some consumers are trying to take matters into their own hands and have already filed proposed class-action lawsuits against FedEx and EssilorLuxottica, a French eyewear company, while more than 1,000 companies have filed their own lawsuits. 

Here’s what the road ahead might look like for consumers and businesses. 

Consumer class-action lawsuits

Individuals can file a lawsuit, but it’ll probably be more common to see plaintiffs’ lawyers bringing forth class-action suits, said Jonathan Shub, co-founder of Shub Johns & Holbrook LLP, a class action law firm. 

It’s just more economically practical for a lawyer to bring forward a case on behalf of 100,000 people, Shub said.

But it’ll also be tough because you’ll have to prove that a company increased prices due to tariffs, Shub said. 

Unless a company that gets refunded actually came out and said they increased the price of a product by a certain amount of dollars due to the tariffs, it’ll be difficult to win the case, Shub said. 

“And there isn’t really a legal obligation to reduce prices, if costs decrease later, in our free market,” Shub said. 

If the U.S. lowered the corporate tax rate, then businesses don’t have to pass on cost savings to their customers, said Rachel Brewster, a professor at Duke Law School. The same principle applies to tariffs, which are a tax, she said. 

Some companies have said on earnings calls that tariff cost pressures would lead them to hike prices. These statements would lend credence to the plaintiffs’ argument, but they are vague, Shub said. 

There are also several criteria you have to satisfy when bringing forward a class-action case, Shub said. You have to prove to a judge that there are enough people to make the suit worthwhile, he explained. (Typically, more than 50 to 60 people is enough, he said.) 

Another hurdle is that there have to be commonalities among all the class members, Shub said. You’d have to go product line by product line and demonstrate that consumers ended up paying more than they would have for a given item, Shub said. 

Consumers are also buying these products at different times, through different channels, which means there are other reasons the price may have gone up, Shub said. 

Business lawsuits

More than 1,000 companies — including Costco, Revlon and  FedEx — have filed suits in the Court of International Trade over tariff refunds. 

Legal experts say they think businesses have a much higher likelihood of succeeding, but businesses still face numerous challenges ahead. 

“It is more likely than not that businesses that are willing to invest the time and effort necessary to succeed in litigation with the federal government will recover some or all of their IEEPA tariff payments, but the administration’s declared resolve to fight against returning the funds means that it is unlikely that all businesses get back everything they paid,” said Adam Lyons, an attorney at Brownstein Hyatt Farber Schreck. 

The Justice Department attempted to delay refund proceedings, which an appeals court ended up denying. 

“The more hurdles the administration puts in the way of refunds, the higher the likelihood that businesses will determine that the cost and risk of litigation is not worth the potential reward,” Lyons said. 

The government could set up a special program through U.S. Customs and Border Protection, making it easier for businesses to just recoup their money, Brewster said.

But instead it looks like the Trump administration is going to make businesses “hire lawyers and litigate for forever and lose a lot of the money through legal fees,” Brewster said. 

“It's great for the legal profession … but fundamentally bad for the U.S. economy,” Brewster said. 

If the Trump administration resists and says every business has to go to trial, the Court of International Trade could dismiss any complaints they file on summary judgment, which means that the government won’t be entitled to a trial, Brewster said.

The Court could then model summary orders after a representative case, Brewster said. 

But the government could appeal these decisions, Brewster added. 

“There are so many claims,” Brewster said. “I think what's going to slow it down will not be the trickiness of the legal issues, it will simply be the number of claims and the unwillingness of this administration to help the Court or Customs, who are tasked with resolving this.” 

Overall, Brewster estimates it could end up taking companies two to four years to receive refunds.