In a pivotal legal fight, former President Donald Trump’s tariffs from the former president’s second term are facing aggressive and new scrutiny. This last test could go a long way in changing the economic playing field for American businesses. A three-judge panel at the U.S. Court of International Trade ruled unanimously against Trump just last week. They announced that his use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs was illegal. If allowed to stand, this ruling could lead to billions in refunds for businesses. They’ve already contributed over $210 billion in tariff-related charges the courts have ruled to be illegal.
The federal appeals court included an October 14 deadline for the ruling’s implementation and Trump is asking officials to thread this timeline to avoid unravelling his tariffs.
Legal Challenges to Trump’s Tariffs
In May, the U.S. Court of International Trade ruled against Trump’s tariff actions, stating that he unlawfully leveraged the IEEPA to impose broad duties on various countries. The result is a daunting legal hurdle for Trump. Now, he’ll have to plead his case to the Supreme Court if he wishes to preserve his tariff regime.
If the Supreme Court upholds the appeals court’s decision, the U.S. Treasury would have to refund hundreds of billions of dollars. This funding will be made available from tariff revenue collected since these duties were put in place. Such a refund would have a major effect on U.S. government finances, since this revenue has been a major force for reducing the need for borrowing.
“When can I have my money back?” – Thomas Beline
As American businesses continue to wait for answers, fears of huge inflation as a result of these refunds are widespread. As economists caution, going back such huge amounts all at once would deepen the existing inflationary pressures.
Economic Implications of Refunds
The economic consequences of reversing Trump’s tariffs reach way outside corporate boardrooms. The Treasury has used this tariff revenue to support its general fund and limit overall expected borrowing by the Treasury Department. If these businesses end up getting refunded, that will amount to a net increase in government debt and spark even more inflationary fears.
Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, voiced apprehension regarding the economic fallout of potential refunds.
“That would refresh investor memories about the Biden years,” – Gary Hufbauer
Inflation is indeed the number one issue right now. A massive and immediate wave of refunds would only worsen this economic background, creating uncertain effects for consumers, investors, and markets at large.
Trump’s Push for Tariff Continuation
Now that the deadline is approaching, Trump is pulling out all the stops. He’s putting the screws to federal governorships and judiciary to keep his tariffs in place. He has described the court’s decision as “huge” for the country.
“It’s a very important decision, and frankly, if they make the wrong decision, it would be a devastation for our country,” – Trump
The former president’s administration, now as before, is busy assembling an appeal to the Supreme Court, possibly as early as this Wednesday. This decision is a clear indication that Trump is intent on sticking to his economic underpinnings as they continue to face growing legal pressures.
This ongoing legal fight will decide the future of Trump’s tariffs. It will have much wider implications for American businesses and the entire economy. If upheld, these tariffs would remain the first large source of money paid directly to the federal government.