Why You Likely Won’t Receive a Tariff Refund

February’s 6-3 Supreme Court ruling in the “emergency” tariff case—Learning Resources Inc. v. Trump—represented a substantial victory for the rule of law and a modest one for U.S. trade policy, yet it did not come without caveats. Indeed, the court’s decision to strike down the tariffs President Donald Trump imposed under the International Emergency Economic Powers Act (IEEPA)—effectively removing the largest, most open-ended tariff tool while restoring a modest check on an increasingly expansive executive power—was welcome. Nevertheless, the decision did not address how to return the billions in taxes that the government collected unlawfully.

This silence was expected, but it nonetheless left tariff refunds to be resolved by a mix of lower federal courts, executive branch officials, and private plaintiffs—a configuration that raised practical, legal, and economic questions. Since then, a number of those questions have found answers, and not every answer is disastrous. Yet the refund process remains far from flawless, and it will yield both genuine beneficiaries and undeserved losers because of the choices the administration has now made—and the ill-advised ones it made last year when launching the president’s sweeping tariff war.

First, let’s recap how we reached this point. As regular readers know, the IEEPA tariffs sat on legally questionable footing. The statute does not mention tariffs, had never been used to impose them, and—though it authorizes the president to take drastic steps during a declared emergency—stretching it to create a permanent, revenue-raising regime unilaterally would be a radical overreach. Every federal court that considered the IEEPA tariffs agreed, culminating in a landmark Supreme Court decision that voided roughly $166 billion in duties collected since the first IEEPA tariffs were imposed last February.

That the Court did not tackle the question of refunding those billions wasn’t surprising. It rarely weighs in on technical issues. But the absence of a mandated refund process triggered a scramble to devise one. The case was remanded to the Court of International Trade (CIT) to adjudicate the refunds issue, and that court quickly assigned a single judge to handle both the refunds and the thousands of importer lawsuits seeking them. The judge acted promptly, selecting a single case to order Customs and Border Protection (CBP) to refund all IEEPA tariffs immediately. So far, so encouraging.

Then complications followed. The agency told the CIT judge that its current import-processing system could not handle mass refunds within the mandated timeframe. The judge relented and directed CBP to rapidly develop a new platform for processing mass refunds, and the agency officially launched the Consolidated Administration and Processing of Entries (CAPE) system last week.

With CAPE in place, the refund process is underway, and that progress alone is worth celebrating, given that administration officials initially argued they would fight any attempt to return even a portion of the illegal tariff funds. Yet CAPE is not without flaws—beyond a few technical glitches reported by importers and customs brokers.

As noted previously, the legal framework requires the government to return illegally exacted taxes; the Trump administration pledged to the courts that any tariffs ultimately invalidated would be refunded promptly; and the ideal refund system would be fast, automatic, and would proactively return collected duties to all importers who paid them. While a few cases do see large, automatic refunds, and smaller refunds are issued on a steady basis, CAPE has not achieved that ideal.

CAPe falls short and, in practice, enables the government to keep billions in unlawfully collected tariffs. The portal requires each of roughly 330,000 importers who paid IEEPA tariffs to create an electronic account, submit detailed, entry-by-entry documentation, and await CBP scrutiny before receiving a refund—a costly, bureaucratic process that CBP says will take at least 60 to 90 days more for each importer. That requirement alone, CBP estimates, will exclude hundreds of thousands of (mostly small) importers who paid IEEPA tariffs last year.

Right now, CAPE does not cover almost 40 percent of the entries (imports) on which illegal IEEPA tariffs were paid because, CBP claims, those entries are more technically burdensome. The agency says it will eventually address most of these entries in later phases, but there is no published timetable.

As I noted in a recent Cato Institute blog post, forcing importers to jump through bureaucratic hoops to obtain refunds will inevitably depress the number who pursue refunds. Some will decide the paperwork costs exceed the refunds owed to them (one mid-sized company CEO told me CAPE paperwork has already cost him $30,000). Nonprofits and trade associations have stepped in to help defray costs, but that assumes importers even know about them. Many of the smallest actors, unfortunately, are unaware.

Other importers will avoid CAPE due to fears it could trigger heightened CBP scrutiny of their filings. Some firms also worry about political backlash or customer lawsuits—valid concerns given that some lawsuits have already been filed and that Trump has publicly warned he will “remember” companies that do not seek refunds.

The system also empowers CBP to scrutinize applications, potentially trimming refunds or nitpicking interpretations. For example, in CAPE’s first week CBP immediately rejected more than one‑third (about 28,000) of the initial 75,000+ claims submitted, each covering thousands of entries. Another 16 percent of the claims that cleared the initial screen failed the second screening (2.1 million of 13.3 million entries). Only 1.7 million entries that passed the second screen were on track for a refund. Importers can refile rejected claims, but that adds time and cost. And those were presumably the easier claims.

Even for entries that eventually clear CBP’s screens, the actual refund amount remains uncertain. CBP has already indicated that full refunds may not be granted in many cases because it will consider other Trump tariffs that would have applied if IEEPA tariffs never existed, and every refund application will undergo a rigorous, multi-stage review. Heavy CBP scrutiny could also yield penalties for past paperwork mistakes or trigger customs audits. Given the well‑documented chaos of the 2025 tariff system, administrative errors are likely, and several have already been found. So, U.S. importers who file expecting full refunds may discover much smaller refunds—and perhaps a government auditor calling soon after.

To be clear, CAPE isn’t the absolute worst refund scenario. But, as the chart below illustrates and as early experiences already show, the design will almost certainly yield payouts far smaller than the government owes. Whether that shortfall is intentional is another question.

Finally, and perhaps most crucially, the government still has an opportunity to appeal the CIT’s refund order before any payments are made. The deadline for doing so is June 6, leaving plenty of uncertainty about what lies ahead—and whether the Trump crew will press refunds more vigorously.

One certainty, however, is that consumers will not receive a direct payment from the government—at least not in a straightforward way. Yes, that’s unfortunate, but it makes sense.

No, really.

First, the law and established precedent hold that tariffs are collected from and refunded to the “importer of record”—the entity that brings goods into the United States and files the official CBP paperwork. This framework also governs other taxes on corporations and individuals, and there is no credible legal argument for discarding it now.

Refunds are delivered through this mechanism mainly for practical reasons. Over the past year there were millions of entries subject to IEEPA duties, and goods move through multiple steps in U.S. supply chains before reaching consumers. Tracking every transaction after clearance would be impractical, and the government would not want to attempt such a feat. Moreover, not every firm passed the full tariff burden onto customers; as noted last year, retailers and intermediaries absorbed part or all of the tariff hit. Forcing firms to reimburse customers for money they never actually charged would be both costly and unfair.

For those firms that did pass along tariff costs, calculating exact refund amounts could be an unwieldy undertaking. Most did not itemize tariffs on receipts, and many spread costs across a wide range of products—some produced domestically. Some smaller businesses, or those operating through third-party sellers, may not even know who their customers were. Determining refunds would require information they simply do not possess.

Fortunately, the market is partially sorting this out on its own. Some U.S. companies did itemize tariff surcharges and are already pledging to refund what the government returns. Notably, FedEx, UPS, and DHL Express say they are working to recover refunds on eligible shipments and return the money to customers who originally paid them. Even some firms that did not itemize or bill customers directly are joining the voluntary refund effort—often with a wink and a smile. Most of these are smaller enterprises (likely hoping for some positive publicity), but even some big retailers like Costco have committed to passing along refunds and IEEPA savings where feasible. The National Retail Federation notes that the refund might not appear as a separate line item, but the money will show up for customers in many cases—and that reality could spur competition to follow suit.

In many business-to-business transactions, moreover, tariff refunds have already been addressed: contracts signed in 2025 included explicit tariff language, obligating importers to pass refunds on when CBP pays them. In other B2B contexts, importers won’t retain windfalls because they want to preserve customer relationships. Litigation here appears likely, but companies will strive to avoid it in most instances.

This system isn’t flawless: many firms won’t openly offer refunds, and it’s almost certain that American consumers won’t be made whole. But given the options, this outcome is probably the best we can reasonably hope for, given the absence of good alternatives. Blame the tariffs for that uncomfortable reality, not the people who paid them. And if you still fault government officials for crafting this costly debacle, there’s always the ballot box.

Although there remains much we don’t yet know about tariff refunds, the landscape already shows some clear winners and losers—assuming refunds begin to flow in.

Among the winners are large firms with in-house compliance teams, experience in dealing with CBP and related import bureaucracy, lawyers who can file suit if problems arise, and the capital and patience to endure the refund process. These companies were better positioned to endure the initial tariff onslaught and are similarly better placed to ride out a bureaucratic refund system. They also were more capable of shifting tariff costs to customers; if they choose to do so despite public pressure, they could reap a windfall.

The other major winner will be Wall Street. As widely reported, hedge funds and other investment outfits saw a chance to profit from tariff chaos by purchasing refund rights from companies wary of Supreme Court losses or messy refund procedures. The Journal notes that “With tariff-refund claims, investors are capitalizing on the uncertainty businesses and others face about whether they’ll ever be able to cash in—and how long it might take.” They were able to snap up importers’ claims for pennies on the dollar, paving the way for substantial returns when CBP pays, and deals can be structured to sidestep legal and PR problems.

There are, unfortunately, also significant losers—beyond the consumers already discussed. The largest will be smaller firms that lack the resources to ride CAPE out or to weather fallout from past paperwork mistakes. Beyond the broker and attorney fees, NPR reports reveal that it takes weeks for small-business owners to assemble the documentation needed to request refunds. Forced to spend substantial time and money assembling import data for only the possibility of a modest refund (or facing a customs audit), many small importers simply won’t bother—or they’ll sell their refund claims to Wall Street at a heavy discount. Others won’t even know about CAPE or the free refund services offered by public-interest groups. Some will also be preyed upon by unscrupulous customs brokers charging exorbitant fees for tasks that should be straightforward—an issue already reflected in LinkedIn chatter. And some businesses shuttered before CAPE even arrived, overwhelmed by large and unforeseen tariff bills.

Remember: tariffs have already placed smaller U.S. suppliers at a disadvantage relative to larger rivals who can navigate trade rules, rearrange supply chains, raise capital, lobby for carve-outs, absorb upfront tariff costs, or push the costs onto customers. Refunds will reproduce those same dynamics for the same reasons.

The other major loser is U.S. taxpayers. As outlined in a recent Cato Institute post, all tariff refunds—IEEPA and otherwise—must include interest at a regulated rate of 4.5 percent for larger transactions and 6 percent for smaller ones, compounding daily. A total IEEPA hit of $166 billion would carry interest of more than $20 million per day as the refunds are paid out. Every dollar refunded is a dollar ultimately borne by American taxpayers—who themselves were tariff‑hit consumers—and delaying refunds inflates the interest owed. Our calculations put the total interest burden likely above $4–5 billion at present, and it’s already roughly $1.5 billion higher than it was when the Supreme Court issued its February decision. If the government were to drag out refund litigation to the end of the President’s term, taxpayers would be on the hook for roughly $25 billion more in interest alone—a figure approaching the annual NASA budget, and for no defensible reason.

So far, the government’s approach to tariff refunds isn’t as bad as it could have been, especially given the initial signal from the Trump administration that it would resist refunds at every turn. But the system isn’t great, not by a long shot, because it is slow and it imposes burdens on the very importers who did nothing wrong and now deserve to recover their own money. The situation could deteriorate further if the government appeals the CIT’s refund order or if CBP seeks ways to narrow payouts or punish applicants for inadvertent CAPE or 2025‑era paperwork mistakes.

Perhaps it’s too much to ask that Washington automatically and promptly refund every penny of Trump’s illegal tariffs, but it’s still galling that many businesses will be hurt, and that millions of consumers and taxpayers will feel the impact too.

The most frustrating part, however, is that the entire litany of frictions and injustices described here—the compliance burdens, the Wall Street arbitrage, the inevitable litigation and political posturing, and the needless interest costs—results directly from an administration that chose expediency over law, seized $166 billion through a series of dubious unilateral taxes, and told federal courts to keep those taxes in place for most of last year on the premise that refunds would be quick and easy if they lost at the Supreme Court. The IEEPA tariffs weren’t a close legal call; the administration gambled with other people’s money and lost big. Now, even in the best-case scenario, the government will still keep billions of dollars that never should have been in its hands. In this sense, the refund saga is about more than paperwork and legal chaos; it’s about who pays the price when the government guesses wrongly. And, as always, it will be the Americans who can least shoulder the burden.

“Endless Shrimp” is back in fashion. When Red Lobster filed for bankruptcy in 2024, its all‑you‑can‑eat plan drew scrutiny. But the new owners believe the concept can work again. The Washington Post reports this week that the chain has reorganized its back-of-house operations for efficiency, is raising prices from $25 to $30 in some locations, and will offer the promotion for a limited time. (If the McRib is any guide, it might just catch on.) The WaPo article also offers tips for diners aiming to “shrimpmax”: skip the Cheddar Bay Biscuits, minimize side dishes, and aim to eat 23 shrimp to get full value. The challenge, clearly, is accepted.

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