Even after the Supreme Court ruled the bulk of President Donald Trump’s illegal, U.S. consumers may still be paying for the levies.
A report published on Monday from the Cato Institute, a libertarian policy thinktank, revealed that as the $175 billion in tariff revenue sits in the Treasury, it is accruing interest. The longer it takes for this money to be refunded to U.S. importers who paid the duties over the last year, the more interest piles up—to the tune of $700 million per month that American taxpayers will have to shoulder, according to the report.
Federal regulations outline that in the case of an overpayment for duties, including those determined to be illegal, those payments must be returned with interest. U.S. Customs and Border Protection (CBP) outlines this interest compounds daily at an annualized rate of 4.5% for overpayments more than $10,000 and 6% on overpayments less than that.
Scott Lincicome, vice president of general economics and the Stiefel Trade Policy Center at the Cato Institute, said with mounting interest on these illegal tariffs, U.S. consumers will weather more tariff pain.
A Federal Reserve Bank of New York report released last month confirmed the suspicions from American firms and consumers that they were the ones paying for the vast majority—indeed about 90%—of the tariffs Trump imposed under the International Emergency Economic Powers Act (IEEPA) last spring. The Yale Budget Lab calculated that IEEPA tariffs cost American households between $1,300 to $1,700 annually due to importers passing down prices. With a new wave of tariffs announced after the Supreme Court ruling, the Yale economists predict U.S. consumers will still pay about $800 per year from the levies.
“Consumers will be the biggest losers here, assuming refunds happen, because it’s not going to be a one-for-one,” Lincicome told Fortune, clarifying Americans will likely not see the entirety of refunds returned to them. “And since consumers are taxpayers, they’re going to get hit twice with paying even a little bit more in all these interest payments.”
The Cato Institute calculated $700 million in interest per month translates to about $23 million per day across about $130 million U.S. households.
How much interest will keep piling up?
Illegal tariff revenue is expected to sit in the Treasury for much longer than a month. The Supreme Court did not address refunds in their decision on the IEEPA tariffs, meaning there is no formal process on how money raised from the levies will be returned to importers. This process will instead be decided upon by CBP and lower courts, such as the Court of International Trade. As a result, refunds are expected to take between 12 to 18 months to reach importers, who can then return that cash to consumers. Trump said the matter could take years to litigate.
Over the next year, IEPPA tariff revenue would have accrued about $8 billion in interest. By the end of Trump’s term, that total would swell to more than $25 billion.
“There’s no guarantee you’re getting your higher prices you paid back,” Lincicome said. “In fact, I would think you’re probably not getting all of it, and you’re going to pay slightly higher taxes, too.”
Has the U.S. dealt with tariff refunds before?
There is, however, already precedent for how tariff refunds could be doled out. For the last 52 years, the U.S. has had a Generalized System of Preferences (GSP) which provides tariff reductions, generally for less-developed countries. However, over this period, the system has expired 11 times. During these lapses, U.S. importers pay the full tariffed amount outlined by U.S. trade policy, but following congressional reauthorization, a provision is made that overpaid tariffs will be refunded. Between 2021 and 2023, U.S. importers were owed about $3 billion in tariff refunds.
While the magnitude of IEEPA tariff refunds is much greater than GSP-related tariffs, the process of issuing those refunds doesn’t widely differ, according to Dan Anthony, president of economist research firm Trade Partnership Worldwide.
“The dollar value is pretty irrelevant,” Anthony told Fortune. “If you do a bank transfer, it doesn’t matter if the transfer is $5 or $500; you still go to the same site. You punch in the same numbers.”
The real trouble with tariff refunds is companies with contracts or handshake deals with importers that may change refunds owed to individual firms, Anthony said. Still, he suggested it’s better for the U.S. government to automate the transfer process to expedite the refunds, and then less importers navigate the rest.
“It’s about: How do you get to that hard step as quickly as possible, without putting up a bunch of hurdles before them?” Anthony said.
