After US tariffs ruling comes the billion-dollar reckoning

The Supreme Court has stripped Trump's ‘emergency’ tariffs of their legal basis, triggering a scramble to recover fiscal losses

Reuters

The US Supreme Court building in Washington, D.C., where it issued its ruling, presided over by John Roberts, overturning the sweeping tariffs imposed by President Donald Trump on 20 February 2026.

After US tariffs ruling comes the billion-dollar reckoning

Abdel-Rahman Ayas

last update on 27 Feb 2026

On 20 February, the US Supreme Court issued a ruling that reshaped the limits on executive authority to impose tariffs. The court found that the International Emergency Economic Powers Act (IEEPA), on which the Trump administration had relied, does not grant the president the power to impose tariffs.

Yet the impact of the ruling lies not only in invalidating the legal foundation of US President Donald Trump’s ‘Liberation Day’ tariffs, but in opening the door to a wave of lawsuits seeking to recover billions of dollars paid since the tariffs were imposed on 5 April 2025. The real battle now begins in the courts, not in politics.

In a landmark decision—passed by a six-to-three majority—the Supreme Court held that the IEEPA cannot serve as a legal basis for imposing broad tariffs on imports from a multitude of countries. In doing so, the court put an end to the administration’s loose interpretation, which had allowed ‘economic emergency’ powers to be used to impose tariffs beyond traditional policy limits.

The ruling didn't address the economic merits of tariffs so much as it focused on a fundamental constitutional question: which authority holds the power to impose taxes and duties? The answer was clear: that authority resides primarily with Congress, and any expansion through executive action requires explicit legislative authorisation.

With this ruling, the court explicitly stated that the IEEPA cannot be used as a permanent tariff tool, bringing the debate back to its constitutional core: the limits of executive authority in managing international trade. What initially appeared to be a legal victory for a group of companies and states soon shifted into a dispute over sums already paid, rather than liabilities that might arise in the future.

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Trump strikes back

The White House made its displeasure with the ruling known. For Trump, tariffs had been central to managing trade relations with China, Europe, Canada, Mexico, and elsewhere, as well as to reshaping supply chains and supporting domestic industries. For his part, Trump unleashed a blistering attack on the Supreme Court, singling out Justices Amy Coney Barrett and Neil Gorsuch, whom he had appointed in his first term and voted with the majority, as “a disgrace to our nation.”

Despite the setback, Trump immediately announced a temporary 10% global tariff on imports, relying on Section 122 of the Trade Act of 1974, which permits limited tariffs for a short period to address balance-of-payments imbalances. The rate was later raised to 15% within the ceiling allowed by law, for a period not exceeding 150 days, unless Congress intervenes.

The administration is also considering recourse to other laws, including provisions on national security or unfair trade practices, that would allow it to impose tariffs under different frameworks.

In his State of the Union address on 24 February, Trump presented tariffs as a central pillar of his economic agenda, arguing that they would shift costs from Americans to foreign countries and could ultimately replace income tax. He said tariffs paid by other nations would “replace the modern-day system of income tax” and would “take the burden off Americans”, framing them as both a source of revenue and a protectionist tool to support US industry.

He also cast his tariff policy as a success, arguing that it should be expanded. He maintained that foreign countries would contribute more to the US Treasury while Americans would pay less, and suggested that tariffs could serve as a significant long-term source of federal revenue.

Brendan Smialowski/AFP — US President Donald Trump delivers remarks on reciprocal tariffs during an event in the Rose Garden entitled "Make America Wealthy Again" at the White House in Washington, DC, on 2 April 2025.

The $175bn refund fight

This legal manoeuvring did little to ease concerns among companies. The central question was no longer whether tariffs would return, but what would happen to the billions already paid.

Within days of the ruling, the US Court of International Trade, based in New York, began receiving successive lawsuits seeking the recovery of tariffs imposed under the legal basis struck down by the Supreme Court. This court is the specialised body responsible for adjudicating disputes relating to customs and duties.

The legal mobilisation was not confined to a single company, although the global shipping firm FedEx was among the first to file a lawsuit demanding a full refund of the tariffs it had paid under the measures invalidated by the court.

As the implications of the ruling became clearer, a broader wave of lawsuits emerged, led by major US companies across multiple sectors, including Costco, Revlon, and Alcoa, alongside hundreds of medium-sized and smaller firms that found themselves with a legal opportunity to recover what they had paid when the tariffs were in force.

Within days of the ruling, successive lawsuits were filed seeking the recovery of tariffs

These actions were not limited to US companies; foreign firms importing into the US and paying tariffs through the American customs system also joined, including Toyota and BYD, signalling that the dispute had moved beyond domestic boundaries to take on an international economic dimension linked to global supply chains and trade.

This diversity of claimants—from transport and retail to manufacturing and consumer goods—reflects the widening scope of the legal issue at hand. The matter is no longer confined to the legality of tariffs, but how funds already collected should be handled, who has the right to recover them, and whether the federal government will face a wave of financial claims long into the future.

US states had entered the legal battle early. On 23 April 2025, a group of 12 states, including Oregon, New York, Arizona, Colorado, Connecticut, Illinois, and Minnesota, filed a suit before the Court of International Trade challenging the tariffs imposed under the IEEPA. On 28 May 2025, the court ruled the tariffs unlawful, after which the government appealed to the Federal Circuit Court of Appeals, which upheld the ruling in August of the same year. After the case moved to the Supreme Court, the final decision was issued on 20 February, opening the door to the current wave of lawsuits.

Estimates by the Penn Wharton Budget Model at the University of Pennsylvania suggest that the tariffs now under dispute could total as much as $175bn if refund claims expand to include a broad segment of companies that paid them. This would make the battle one of the largest financial disputes between the private sector and the federal government in recent decades.

Foreign governments affected by the tariffs, meanwhile, have not filed lawsuits in US courts to recover funds, but continue to pursue their disputes with Washington through the World Trade Organisation or through bilateral trade negotiations.

FABRICE COFFRINI / AFP — A delegate leaves a World Trade Organisation (WTO) building during the 2018 edition of the WTO public forum on sustainable trade, on 2 October 2018, at the WTO headquarters in Geneva.

The complexities of recovery

Invalidating the legal basis of the tariffs does not automatically mean funds will be returned. The ruling did not set out a clear enforcement mechanism, leaving details to lower courts and administrative procedures.

A web of complications has therefore emerged. First, which parties are entitled to claim refunds? Will claims be limited to companies that filed lawsuits directly, or could they extend to any entity that paid tariffs under the invalidated measures? Second, will recovery be limited to the principal amounts, or will it include interest and compensation for indirect losses incurred due to higher costs and disrupted supply chains? And third, who bears the financial responsibility—the Treasury, US Customs and Border Protection, which collected the tariffs, or will the matter be resolved through separate administrative settlements?

These questions make the recovery process far more complex than simply enforcing a judicial ruling. The issue could evolve into a long series of appeals and counter-appeals, and perhaps negotiations conducted outside courtrooms in pursuit of settlements. As the ruling paves the way for a broad wave of tariff refunds, a new reality is taking shape: tariffs are no longer merely an economic pressure tool; they have become a potential financial burden on the federal budget.

The dispute also extends beyond finances to the structure of the US constitutional system. The ruling enshrines the principle that the executive cannot use emergency economic laws to impose broad trade policies without clear authorisation from Congress. This development restores a measure of balance between the legislative and executive branches in trade policy and places constraints on any future administration that considers tariffs a rapid political instrument.

It also sends a message to global markets that US trade policies, however forceful or sudden they may appear, remain subject to judicial oversight, reinforcing legal uncertainty whenever exceptional tools are used expansively.

Invalidating the legal basis of the tariffs doesn't automatically mean funds will be returned, as a clear enforcement mechanism wasn't specified

Changed equation

Tariffs under Trump were part of a broader negotiating strategy. They were used to pressure trading partners, reshape supply chains, and boost revenues. The ruling has now altered that equation. If courts compel the government to return large sums, what was once viewed as a revenue source could become a tangible financial burden on the federal budget, reigniting debate over the merits of protectionist policies.

Ongoing litigation is also likely to generate uncertainty in the markets. Companies seeking refunds may delay investment decisions until the picture becomes clearer, while trading partners monitor developments to gauge the stability of US trade policy and rely on negotiations to resolve disputes.

The widening base of claimant companies—spanning retail and manufacturing—reinforces the notion that the dispute is no longer confined to directly affected firms but reflects a broader institutional shift within the US economy, redefining the relationship between trade policy and executive authority.

Despite the ruling, the file is far from closed. The administration continues searching for alternative legal tools, while companies press ahead with efforts to recover what they have paid. These cases could take years before their outcomes become clear.

Ultimately, the issue goes beyond tariffs themselves to the question of how economic policy is managed in a system built on a delicate balance of powers. As a result, what began as a tariff decision has evolved into an open constitutional and financial test. The battle is now in the courts—and it may remain there for a long time.

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