In a landmark decision with far-reaching implications for trade and corporate balance sheets, the U.S. Supreme Court found that the 1977 International Emergency Economic Powers Act did not authorize the former President to implement wide-ranging tariffs on imports. The ruling removes the legal foundation for many of the emergency tariffs that business groups say inflated costs across consumer goods, automotive, manufacturing and apparel supply chains.
Executives and investors reacted positively to the court’s order, with shares in affected firms, including luxury names across Europe, moving higher in the hours after the decision. For thousands of businesses that paid the levies, however, the legal win marks the start of a potentially long and administratively heavy campaign to reclaim duties that Penn-Wharton Budget Model economists estimate could top $175 billion.
Since the tariffs were first imposed, companies that rely on low-cost production hubs such as China, Vietnam and India have reported margin pressure and supply-chain disruption as import costs rose. The levies raised the price of finished goods and intermediate parts, and many firms passed at least a portion of those costs onto consumers.
Legal activity has escalated rapidly. More than 1,800 tariff-related lawsuits have been filed with the U.S. Court of International Trade since April, a striking jump from under two dozen such suits in all of 2024. Plaintiffs range across industries and geographies, and include subsidiaries of the Toyota Group, U.S. retailer Costco, Goodyear Tire & Rubber, aluminum producer Alcoa, Kawasaki Motors and eyewear conglomerate EssilorLuxottica.
Lawyers and corporate counsel say many firms that have so far stayed on the sidelines may now press refund claims. Some companies deliberately waited to take action until the court had clarified the legal landscape, avoiding unwanted attention during the tariff program’s active phase. That influx of claimants, however, will create a queue for reimbursements and could significantly slow individual recoveries.
Once refund claims move forward, the U.S. Court of International Trade is likely to play a central role in adjudicating and administering recoveries. Attorneys caution that even companies that ultimately prevail should not expect rapid repayment. Firms that filed suits early are expected to receive refunds more quickly than those that initiate claims after the ruling.
Nabeel Yousef, a partner at law firm Freshfields, highlighted a practical hurdle: companies must assemble detailed import records to calculate how much they paid under varying tariff regimes and time periods. "Companies face the challenge of gathering detailed import data to calculate the tariffs paid under various regimes, which were applied over different time periods. Even multinational firms may not have all their data neatly organized," he said, stressing that refunds will not be instantaneous.
Policy shifts that remain outside the scope of the 1977 act will continue to affect trade flows. Administration officials have indicated they will use alternative statutory authorities to impose duties where they deem it necessary, including measures aimed at addressing unfair trade behavior and protecting sectors viewed as integral to national security.
Ted Murphy, co-leader of Sidley Austin’s global arbitration, trade and advocacy practice, summarized the situation succinctly: "It’s not like tariffs are going away. They’re just going to be under a different umbrella." That point is especially pertinent to the auto sector, where certain levies were based on national-security reasoning and remain in force. For example, 25% import duties on vehicles shipped from Mexico and Canada were applied last year under national-security provisions and are unaffected by the court’s decision on the 1977 act.
Still, attorneys note that many auto parts shipped into the United States from countries subject to reciprocal tariffs were covered by the emergency levies, raising costs for suppliers and assemblers alike. The combination of ongoing national-security based tariffs and the potential unwinding of emergency duties will leave firms navigating a mixed landscape of continuing and rescinded levies.
Beyond litigation, companies are already adapting their financial strategies to cope with uncertainty over recovery timing. Some U.S. importers have opted to assign or sell their rights to seek refunds to third-party investors. Under such arrangements, companies accept an upfront payment roughly in the range of 25 to 30 cents on the dollar and forgo the remaining potential recovery should the tariffs be overturned.
Logistics and service providers have signaled readiness to support clients through the refund process. German logistics firm DHL said it will deploy technology tools to help ensure customers receive authorized refunds accurately and efficiently, emphasizing the operational complexity of reconciling payments across import portfolios.
The economic incidence of the tariffs has been a point of analysis and debate. The Federal Reserve Bank of New York estimated that 90% of the cost burden from these tariffs landed on U.S. consumers and companies, pushing back against claims that levies are primarily paid by foreign exporters. Relatedly, the effective U.S. tariff rate rose to 11.7% as of November, compared with an average of 2.7% during 2022-2024, according to analysis by the Yale Budget Lab. These changes contributed to higher prices at a time when many consumers were already coping with post-COVID inflation.
Not all market participants expect any recovered duties to translate into lower consumer prices. Jason Cheung, CEO of small toymaker Huntar Co, which is among the plaintiffs seeking refunds, said he expects his company to file for reimbursement but is skeptical that retailers will cut prices in response. "We would definitely be filing for a refund as I imagine every other importer would. I highly doubt prices will go down though. That rarely occurs," he said.
As firms prepare claims and courts sort through litigation, the full economic fallout of the Supreme Court’s ruling will unfold over months and likely years. For now, the decision delivers a legal setback to the emergency tariff program, while leaving intact other tools that can be deployed to shape U.S. trade policy and protect domestic industries.
Key points
- The Supreme Court ruled the 1977 International Emergency Economic Powers Act does not authorize broad import tariffs, opening the door to refunds for thousands of companies.
- More than $175 billion in duties could be eligible for repayment, but the claims process will be administratively complex and time-consuming.
- Sectors most affected include consumer goods, automotive, manufacturing and apparel, and shares of luxury brands moved higher following the decision.
Risks and uncertainties
- Refund timing is uncertain - companies may wait months to years to recoup duties, straining cash flow for import-dependent businesses in manufacturing and retail.
- Policymakers can and plan to deploy alternative legal authorities to impose tariffs, meaning some trade costs will persist, particularly in national-security-sensitive industries like autos.
- Even if refunds occur, there is no guarantee recovered funds will lead to lower consumer prices, leaving households and demand-sensitive sectors exposed to prior cost pressures.