Trump may face tariff refund ‘nightmare’
Donald Trump could face the “nightmare scenario” of being forced to refund the money collected by his tariffs, a leading City advisory firm has told CityAM, after a federal court deemed most of them illegal.
The court found last Friday that the US President overstepped his office’s powers when he unilaterally announced April’s so-called reciprocal tariffs that sent markets into a frenzy and upended global trade patterns.
Trump has since asked the US supreme court to overturn the decision, which hinged on whether he had abused ‘economic emergency’ legislation in order to push through the trade fusillade that ratcheted up the cost of exporting goods to America.
Now, a top expert has warned that unless he is granted a reprieve by the Republican-dominated supreme court, Trump may be forced to reimburse the countries and companies that have had to foot a string of fast-changing tariffs handed down by the White House.
“If the supreme court does eventually agree with the appeals court that these… tariffs are illegal, there will be a nightmare scenario of having to refund all the monies which have been collected in respect of tariffs which should not have been levied,” said John Havard, a consultant at Blick Rothenberg.
Ruling could be ‘major blow’ to Trump
Any decision to uphold the judgment – and instruction to refund tariff payments – would represent a major blow to Trump and his Treasury secretary Scott Bessent, who have previously claimed the trade duties will generate $300bn in revenue for the US economy.
It may also raise the spectre of another run on government bonds, as Bessent had vowed to channel the policy towards paying down the US government’s ballooning sovereign debt.
But Havard added even if the nine justices of the supreme court opt to uphold the ruling, there are other legal avenues Trump may pursue to push through his trade policy, which formed a central part of his pitch to voters.
“Don’t expect President Trump to give up on tariffs should he lose in the Supreme Court,” he said. “A variety of other statutes do authorise the President to unilaterally impose tariffs in certain circumstances.”
Havard said he expected Trump to use either the Trade Act of 1974 or the Trade Expansion Act of 1962 as legal cover to pursue a trade blitz that the Federal Reserve recently warned was already starting to appear in prices across the country.
Last month, Walmart said it had started to pass the cost of tariffs onto its customers, warning that they were rising with “each week” the barriers remained up. And in May, retail juggernaut Target was forced to slash its expectations for the year, which it blamed on a “hugely challenging environment”.