It’s been months since the Supreme Court ruled that the “Liberation Day” tariffs were unlawful, yet the costs of that policy failure continue to mount for taxpayers.
Between April 2025 and February 2026, Donald Trump levied tariffs under the authority of the International Emergency Economic Powers Act (IEEPA). The Court on February 20 ruled that IEEPA does not authorize the president to impose tariffs.
Following that decision, the Court of International Trade issued a universal injunction which found that previously collected tariff payments must be refunded. Five months and multiple lawsuits later, $23 billion out of $166 billion in refunds had been paid to importers. While $40 billion was expected to have been paid out by the end of June, further litigation brought by the government threatens to prevent refunds, increase administrative burdens, and raise interest costs for taxpayers.
International Emergency Economic Powers Act Ruling and Refund Process
Trump’s IEEPA tariffs were initially announced on April 2, 2025. The Supreme Court ruled that IEEPA permits emergency economic controls, such as freezes of trade, but does not authorize tariffs. The ruling also stated that, in principle, IEEPA tariff payments were subject to reimbursement, although it did not establish the refund mechanism.
When products are imported into the United States, the importer pays an estimated duty on that good, allowing it to enter the U.S. market. U.S. Customs and Border Protection (CBP) later liquidates the entry, which finalizes the amount owed and resolves any discrepancies in the deposited value. Importers then have 180 days to protest the duty. Importers may also flag an entry for reconciliation when duty-related information is not fully available at the time of entry. They later file a Type 09 reconciliation entry to correct and finalize calculations.
Given that the Supreme Court did not resolve whether or how the government would issue refunds, the ruling was remanded to the Court of International Trade, which directed Customs and Border Protection to create a refund process.
CBP launched the Consolidated Administration and Processing of Entries (CAPE) program to issue refunds in three separate stages to importers who paid IEEPA tariffs. The initial refund process, Phase 1 began on April 20, 2026 and covered all entries that were not yet liquidated or had been liquidated within the prior 80 days. More than $95 billion has been queued for refunds during Phase 1.
Phase 2 covers reconciliation entries where the underlying entry is unliquidated or was liquidated within 80 days of the Phase 2 starting date, June 29. Phase 2 refunds cover approximately $28.7 billion.
Phase 3, targeted to start late July, will cover the liquidated entries closed more than 80 days before the relevant CAPE refund period. This Phase is expected to cover an estimated $33 billion.
Lawsuit Appeal and Interest Rates
The Department of Justice (DOJ) appealed the Court of International Trade’s refund order. Its appeal focuses on whether CBP can be required to refund IEEPA duties on entries which have finalized liquidation. The DOJ also challenged CIT’s universal remedy for the refund order, targeting importers that did not file independent suits with the Court.
If the government prevails, non-plaintiff importers with finalized liquidated entries may be excluded from Phase 2 and 3 refunds.
This increases the administrative burden on all parties involved: importers, who must wait longer for refunds; the federal government, for filing an appeal and requiring further litigation representation; the courts, who need to process additional refund suits from independent filers; and the taxpayer, who will cover the interest payments on delayed refunds.
CBP is expected to pay interest on IEEPA refunds calculated from the date of deposit, at a rate of 7% for noncorporate taxpayers and 6% for corporate taxpayers.
The Cato Institute analyzed monthly IEEPA revenues and estimated interest payments and found that every month of delayed refunds accrues $700 million more in interest. Within the two months between the court ruling and refund process, more than $1.3 billion in interest payments have accrued. Additionally, the outcome of the appeal for Phase 2 and 3 refunds could significantly delay repayment and accrue further interest. Public transparency on total interest accrued is limited, with monetary IEEPA revenue estimates serving as one of the few available indicators.
Future Tariff Litigation
The Administration’s alternative to IEEPA tariffs, Section 122 tariffs, have recently been ruled unlawful. Section 122 tariffs are intended to resolve a temporary balance-of-payments problem. The current ruling limits remedies to the plaintiffs that brought the case and proved direct burden: the state of Washington, Burlap and Barrel, and Basic Fun. However, a stay has been issued, preventing refunds and keeping the tariffs in effect until the DOJ appeal is resolved. Depending on the outcome of the appeal, refunds could be granted to the plaintiffs.
If the plaintiffs prevail, further litigation by affected parties could also seek refunds by proving direct harm by the Section 122 tariffs. This could create a similar administrative burden if the courts require independent lawsuits rather than a universal remedy. Those refunds would also accrue interest.
Consumers were harmed by higher prices while the tariffs were in effect, yet importer refunds do not necessarily flow back to households. Trade decreased as a result of the IEEPA tariffs, while consumers faced an average price increase of $800 per household.
Consumer class action filings and new legislation have been proposed to return tariff-related damages downstream to consumers. The class action filings are framed around higher retail prices and tariff-related charges passed on to consumers. However, class action filings face significant administrative and evidentiary hurdles because plaintiffs must prove that the increased costs were directly attributable to the tariffs. This is especially difficult where sellers did not separately identify tariff-related charges. The proposed legislation therefore offers a broader alternative by directly refunding taxpayers through a broad-based taxpayer rebate. These legal actions and new legislation create new uncertainty about the ultimate outcome of tariff rebates.
Outcome
The period of IEEPA tariffs shows how quickly poor trade policy can create lasting economic costs. Consumers faced higher prices while the tariffs were in effect. Now, importers must navigate a refund process and potentially face class action lawsuits, while taxpayers fund the interest and administrative costs of a delayed repayment.
Although the Supreme Court struck down the IEEPA tariffs, the refund process is ongoing, and the government’s appeal may limit recovery for importers. Attempts to replace IEEPA tariffs through Section 122 have already led to further litigation and may produce similar refund disputes, further increasing costs for taxpayers.
If the Trump Administration is convinced of the need for tariffs, it can avoid future legal turmoil by seeking congressional approval in accordance with Article I, Section 8 of the Constitution. Congress is even proposing legislation to further limit tariff action without congressional approval.
However, in the meantime, the Administration should drop its appeal of the refund order while expediting the refunds that the government owes to individuals and businesses so that taxpayers are not stuck with higher interest costs.