The Supreme Court’s Opinion on Tariffs Leaves a Major Question Unanswered
The Court struck down the policy, but the money is still missing
The Supreme Court of the United States issued its most sought-after opinion Friday morning, a case known as Learning Resources, Inc. v. Trump. At stake was President Trump’s sweeping tariff policies. As just about everyone now knows, the Supreme Court found against the government in a 6-3 decision written by the Chief Justice. I read the entire opinion,1 and I’m here to report back to you.
The administration’s tariffs were based on a law called the International Emergency Economic Powers Act, or IEEPA, as it’s now known. The law states that the president, after identifying an “unusual and extraordinary threat,” may, among other acts, “regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest.”
Perfectly clear, right?
The government’s argument to the court was that because of the words “regulate” and “importation,” the Executive Branch can issue tariffs under this law, because tariffs are a type of regulation.
Chief Justice Roberts and five of his colleagues read that argument and essentially said: no. Roberts’ opinion boiled down to four points:
1. The administration’s argument is based on the words “regulate” and “importation,” which are separated by 16 other words in IEEPA. “Those words,” Roberts wrote, “Cannot bear such weight.”
2. Article I, Section 8 of the Constitution specifies that “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises.” The founders assigned the taxing power to Congress – not the executive branch.
3. At no point in our nation’s history has Congress ever subtly intonated that an executive power included unilaterally imposing a tax. Any time the Congress has ever wanted to give a taxing power to the president, they have done so explicitly within a law.
4. The government’s argument was based on the word “regulate,” but when pressed by the Court, they could not identify a single case in United States history where the word “regulate” allowed taxes to be put into place, without the express written consent of the Congress.
During oral arguments, the government admitted that “the president does not have any inherent authority to impose tariffs during peacetime.” And since we’re not at war with every nation around the world, that pretty much sealed the deal.
Now that this issue is settled, what next? Well, the biggest unanswered question is what happens to all of the tariffs already paid under IEEPA by millions of companies and citizens across the country? According to Customs and Border Patrol, the current estimate is that $179 billion in total receipts have been collected for IEEPA tariffs. And naturally, everyone that contributed to that now wants their money back2. The Court’s opinion conspicuously did not touch this issue, and in fairness, that question was not put in front of the Court. The only issue they were asked about was whether the tariffs themselves were legal.
More than likely, what will happen now (if it hasn’t already) is that hordes of companies will file suit against the government to get their money back. If money was collected under a statute later deemed illegal, restitution would logically follow. We can expect that these cases will eventually be joined together, and also end up in the Supreme Court one day, likely a few years from now. That’s right, we’re all likely going to be waiting quite a while to see if any of us get our money back.
But let’s assume, just for argument’s sake, that the government will eventually be required to refund all of the IEEPA tariffs. There are many questions that arise.
First, how will the money be returned? Is each company going to be required to petition CBP for a refund? Or will it be required to be done by the Customs broker who filed the entry summary in the first place? Is it going to be on a per-entry basis or in aggregate?
Another question that arises in my mind is what happens to all of that money, once it’s returned? Most tariffs are paid by corporations. Whether that money ever flows back to consumers is a different question entirely. A company like Walmart? There is almost no way that they return the money back to their consumers. More than likely, companies will simply pocket this refund.
Now, that raises its own questions in kind. First, what happens to the U.S. economy when $179 billion of cash is suddenly added into companies’ coffers? That number sounds enormous, but in macroeconomic terms, it’s not. The stock market (meaning the value of all public companies) is about $70 trillion. The United States’ annual GDP is about $31.5 trillion. The amount of IEEPA tariffs that have been paid amounts to 0.2% of the total stock market value and 0.5% of annual GDP. Not trivial, but way less than you might expect. And the stock market number doesn’t even count every small business that has paid tariffs over the last year.
Estimates have put the cost of tariffs for each family at between $400 and $1700. If families get refunds, will they spend it or pay down record household debt?
And what about prices that have been hiked because of the increase in costs? Some companies may certainly choose to lower their pricing, but you and I both know that most companies will just pocket the money, knowing that consumers have generally accepted (albeit unhappily) new pricing. But does this mean that, when supplier or raw material prices increase in 2026, they will then absorb that pricing, since they’re looking at an increased margin from the tariff refunds? The range of outcomes runs from short-term deflation to lower inflation over the next few years. Consumers would want the former, but economists would want the latter.3
Basically, this decision does not really answer the “what now” question. In fact, shortly after the announcement, we also saw President Trump announce a new round of 10% global tariffs based on a different law, which the administration claims allows the president to do so temporarily for 150 days. That’s five more months of essentially the same tariffs, which likely will also be challenged in court. In other words, as one legal theory collapses, another takes its place.
So what do you do now, if you’re a small business owner? Especially if you’re one who has been directly or indirectly affected by tariffs? Well, my (non-legal and non-binding) suggestion would be: nothing. There is too much unresolved to justify major strategic shifts. Rather, keep paying attention to any court cases that arise from this ruling, but don’t make big changes to your business until there is more certainty moving forward. Don’t overreact to incomplete information.
Lastly, and most importantly, a quick reminder to anyone viewing this decision through a partisan lens. After the opinion was released, some political leaders quickly framed the decision as good or bad for the country. The Supreme Court’s job is not to weigh economic consequences. That’s the job of the Congress and the President4. The Supreme Court’s job is to interpret statutory and constitutional authority.
The law has been clarified, but the money has not. Whether $179 billion returns to companies, stays in government coffers, or gets tied up in litigation for years will shape the real economic impact of this decision. For now, the only certainty is uncertainty. And for small businesses, that means discipline matters more than reaction.
The Court answered the constitutional question. The economic one is just getting started.
Don’t say it. Just…don’t say it. I already know.
*Raises hand*
Deflation, while sounding good in principle, is generally very bad for economies. It usually takes wages down with it.
Well, theoretically.