Supreme Court strikes down Trump’s tariffs but refunds remain a mess

Court rules tariffs broke the law

The Supreme Court ruled 6-3 on Feb. 20 that President Trump’s tariffs under the International Emergency Economic Powers Act (IEEPA) were illegal.

Chief Justice John Roberts wrote the majority opinion, joined by Justices Sotomayor, Kagan, Gorsuch, Barrett, and Jackson.

The court said IEEPA’s power to “regulate importation” does not include the power to set tariffs, which the Constitution gives to Congress.

The ruling threw out both the “Liberation Day” tariffs and fentanyl-related tariffs on goods from China, Canada, and Mexico.

Costco sued before the ruling came down

Costco didn’t wait for the Supreme Court.

The company filed its lawsuit on Nov. 28, 2025, in the U.S. Court of International Trade, asking for a full refund of every IEEPA duty it paid that year.

Costco argued that even if the court struck down the tariffs, importers weren’t automatically guaranteed their money back without their own court judgment.

U.S. Customs and Border Protection had denied the company’s request to extend a Dec. 15 deadline that would have locked in its tariff payments for good.

Hundreds of companies filed similar suits

Costco had plenty of company. FedEx became the first major company to sue after the decision, filing on Feb. 24.

Dozens of businesses filed their own lawsuits before the ruling, including Revlon, Kawasaki, Bumble Bee Foods, and Yokohama Tire.

More than 1,000 businesses had already sought tariff refunds before the court even ruled, and that number is expected to grow fast in the coming weeks.

Shoppers probably won’t see a dime

Here’s the part that stings for everyday Americans. Treasury Secretary Scott Bessent said Costco’s customers likely won’t see a cent.

Refunds go to the “importer of record,” meaning the company that paid the tariff, not the shoppers who paid higher prices at the register.

Research from Harvard Business School’s Pricing Lab found that consumers covered about a quarter of tariff costs through higher prices.

Nothing legally stops companies from sharing refund savings, but experts say it’s unlikely.

Collected tariffs could top $175 billion

The total amount of money at stake is staggering. U.S. Customs and Border Protection reported about $133 billion collected as of mid-December 2025.

The Tax Foundation put the figure above $160 billion through Feb. 20. Economists at the Penn Wharton Budget Model said the total could top $175 billion.

Costco has never said how much it paid, but about a third of its U.S. sales come from imported products.

Tariffs cost families about $1,000 in 2025

The nonpartisan Tax Foundation estimated tariffs cost the average U.S. household about $1,000 in 2025. That number was on track to hit $1,300 per household in 2026 if all tariffs stayed in place.

The Federal Reserve Bank of New York found that about 90% of the economic burden of tariffs fell on U.S. firms and consumers.

Even after the Supreme Court ruling, remaining tariffs under other laws are expected to cost households about $400 a year.

Costco absorbed costs on key imports

Costco tried to shield its members from the worst of it.

About a third of the company’s U.S. sales come from imports, and Chinese goods make up about 8% of total U.S. sales.

The company chose not to raise prices on staples like bananas and pineapples from Central and South America.

Costco’s chief financial officer said the company worked with suppliers to offset costs, including shifting production to other countries and combining purchases.

Refund timeline could stretch for years

The Supreme Court’s majority opinion didn’t say how refunds should work, and that’s a big problem. Justice Kavanaugh wrote in his dissent that the refund process is likely to be a “mess.”

Trump told reporters the process could take up to five years. TD Securities estimated refunds could take 12 to 18 months to start going out.

In January, the administration had agreed to refund IEEPA tariffs after a “final and unappealable decision,” but the path forward is now unclear.

Democrats want refunds to reach consumers

Sens. Elizabeth Warren, Peter Welch, and Cory Booker wrote a letter to President Trump demanding that tariff refunds go to consumers and small businesses.

They argued the administration’s approach amounts to a giveaway to large corporations. The White House did not respond.

Two House members introduced a bill that would require Customs and Border Protection to automatically refund all tariffs collected under IEEPA since Jan. 1, 2025.

No legislation has moved forward yet.

Trump signed new tariffs within hours

Hours after the ruling, Trump signed an executive order putting a new 10% global tariff in place under Section 122 of the Trade Act of 1974. He later said he plans to raise the rate to 15%, the maximum that law allows.

The new tariffs took effect on Feb. 24. Section 122 tariffs last only 150 days and need congressional approval to go beyond that.

The administration said combining these with existing tariffs would keep total tariff revenue roughly the same in 2026.

Other tariffs remain untouched by the ruling

The Supreme Court only struck down tariffs under IEEPA.

Tariffs on steel, aluminum, copper, cars, auto parts, lumber, semiconductors, and other goods under Section 232 remain in place.

Section 301 tariffs targeting Chinese goods from Trump’s first term are also unaffected. The administration has launched new trade investigations that could lead to more tariffs under different laws.

Experts say the ruling limits the president’s ability to use tariffs as a quick bargaining chip, but it does not end the broader tariff push.

The case heads back to trade court

The case now returns to the U.S. Court of International Trade, which will handle the refund process. Companies will need to file claims through existing customs procedures or go to court on their own.

Whether Customs and Border Protection will create an automatic refund process or make each company fight individually remains unclear.

The Section 122 tariffs expire on July 24 unless Congress acts. That vote could become a major issue in the 2026 midterm elections.

This article was created with AI assistance and human editing.

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