When President Trump unveiled his sprawling global tariffs last spring, he boasted that they would generate windfall profits and \u201cmake America wealthy again.\u201d<\/p>\n
The Trump administration on Monday took its first steps toward returning more than $166 billion collected from tariffs that were struck down in February. Just over a year after imposing many of the duties, the government began accepting requests for refunds, surrendering its prized source of revenue \u2014 plus interest.<\/p>\n
For some U.S. businesses, the highly anticipated refunds could be substantial, offering critical if belated financial relief. Tariffs are taxes on imports, so the president\u2019s trade policies have served as a great burden for companies that rely on foreign goods. Many have had to choose whether to absorb the duties, cut other costs or pass on the expenses to consumers.<\/p>\n
By Monday morning, those companies could begin submitting documentation to the government to recover what they paid in illegal tariffs. In a sign of the expected demand, more than 3,000 businesses, including FedEx and Costco, had already sued the Trump administration in a bid to secure their refunds before the application website launched, with some cases filed even predating the Supreme Court\u2019s ruling.<\/p>\n
But only the entities that officially paid the tariffs are eligible to recover that money. That means that the fuller universe of people affected by Mr. Trump\u2019s policies \u2014 including millions of Americans who paid higher prices for the products they bought \u2014 are not able to apply for direct relief.<\/p>\n
The extent to which consumers realize any gain hinges on whether businesses share the proceeds, something that few have publicly committed to do. Some have started to band together in class-action lawsuits in the hopes of receiving a payout.<\/p>\n
Many business owners said they weren\u2019t sure how easy the tariff refund process would be, particularly given Mr. Trump\u2019s stated opposition to returning the money. The administration has suggested that it may be months before companies see any money. Adding to the uncertainty, the White House has declined to say if it might still try to return to court in a bid to halt some or all of the refunds.<\/p>\n
Melkon Khosrovian, the co-founder of Greenbar Distillery in Los Angeles, prepared for the refund process by readying documents and registering on the new government refund portal. Mr. Trump\u2019s duties had been a \u201cnightmare\u201d for his distillery, he said, which requires foreign-grown ingredients like vanilla, nutmeg, juniper berries, coffee, tea and hibiscus.<\/p>\n
Mr. Khosrovian, a participant in We Pay the Tariffs, a coalition of small businesses that have opposed the president\u2019s policies, admitted he didn\u2019t have high hopes that he would see a refund anytime soon. His company had paid nearly $100,000 in tariffs that are now deemed illegal.<\/p>\n
\u201cWe\u2019re thinking we might get it back, we might not get it back,\u201d he said. \u201cIt feels like a very opaque process.\u201d<\/p>\n
More than 3,000 businesses, including Costco, sued the federal government in a bid to secure tariff refunds. Credit…Johnny Milano for The New York Times<\/p>\n
The White House did not respond to a request for comment. A spokeswoman for U.S. Customs and Border Protection, which manages the tariff refund process, declined to make officials available for an interview.<\/p>\n
At the heart of the matter is the ever-changing slate of so-called reciprocal tariffs that Mr. Trump imposed last year using the International Emergency Economic Powers Act, or IEEPA. No president before him had ever used the 1977 law to apply tariffs, prompting the Supreme Court to rule against Mr. Trump in February. The decision ended Mr. Trump\u2019s most nimble and potent trade power<\/a>, which he had used for a vast array of purposes \u2014 from fighting illegal drugs to protecting political allies abroad.<\/p>\n While the government has lost trade cases in the past \u2014 and has been forced to refund money as a result \u2014 the repayment process now awaiting Mr. Trump is unlike any in recent history. By the administration\u2019s own count<\/a>, there were more than 330,000 importers by March that had paid IEEPA duties on more than 53 million entries.<\/p>\n The government estimates that it amassed more than $166 billion in revenue from those taxes on imports. That outstanding balance is expected to accrue roughly an additional $650 million in interest each month, or about $22 million per day, according to Scott Lincicome, the vice president for general economics at the libertarian-leaning Cato Institute.<\/p>\n The fiscal stakes alone prompted Mr. Trump to assert throughout the legal battle that a loss could tip the government into a \u201cGREAT DEPRESSION!,\u201d<\/a> a claim that economists widely rejected. Once the Supreme Court ruled against him, his administration then tried to slow the process<\/a> until the Court of International Trade intervened in March<\/a> and ordered the government to return the money to importers.<\/p>\n The trade court\u2019s order appeared to set off a scramble among federal customs officials to put together a digital process for handling a crush of requests, according to legal filings. Those filings also revealed the technical challenges that the Trump administration faced in trying to return the money.<\/p>\n Among the many obstacles, the Trump administration said it had to stand up an entirely new system<\/a> that could process refunds in bulk and disentangle illegal tariffs from legal ones on those same goods. At first, the government didn\u2019t even have a way to deposit money directly into the bank accounts of most importers, customs officials said.<\/p>\n As a result, the refund system that debuted on Monday, known as CAPE, can only process imports only at a certain point of the duty-paying process. That covers about 63 percent of import entries subject to IEEPA tariffs, the government previously said<\/a>, though it plans to expand the system soon. In its prior public guidance, customs said it expected it would take 60 to 90 days<\/a> to issue a refund once it accepts an importer\u2019s filing.<\/p>\n Katie Hilferty, who oversees the trade practice at the law firm Morgan Lewis, described the refund process as novel and complex, adding that she would be \u201cpleasantly surprised\u201d if refunds were paid as quickly as the government said.<\/p>\n But, she added, given the scale of the operation, \u201cI would not be surprised if there are technical glitches or other processing errors that occur.\u201d<\/p>\n Some small-business owners seemed especially pessimistic, particularly after weathering a year of ever-changing tariff pressures from Washington.<\/p>\n \u201cI wouldn\u2019t say I\u2019m at all optimistic that they are going to come in a timely manner,\u201d said Cassie Abel, the founder and chief executive of Wild Rye, which produces outdoor wear for women. Her company also participated in the We Pay the Tariffs coalition that has opposed the president. Ms. Abel said she was expecting about $250,000 in refunds, plus interest.<\/p>\n Even if they are able to recoup their tariffs, the largest U.S. companies are likely to face pressure to share any refunds with customers, who have seen prices rise as a result of Mr. Trump\u2019s duties.<\/p>\n FedEx has already said it would try to return any refund money to customers. Credit…Scott McIntyre for The New York Times<\/p>\n At least one company, FedEx, has already said it would try to return the money to customers. The shipping giant is frequently listed as the importer of record, but it passes along the duties<\/a> owed to the customers and companies that purchased the goods.<\/p>\n Another company, Costco, has signaled it could pass on the benefit of any refunds received to shoppers, potentially in the form of lower prices. Yet the buy-in-bulk retailer still faces a new class action lawsuit from shoppers who believe it should give the money directly back to customers.<\/p>\n Alex Durante, a senior economist at the Tax Foundation, a nonprofit that generally favors lower taxes, said he did not expect businesses to exhibit an \u201cimmediate urge to pass all that back to consumers.\u201d<\/p>\n For one thing, he said, many companies are bracing for the president to finalize a set of new tariffs to replace those that the Supreme Court invalidated. That, he explained, would probably also limit businesses from spending much of their refunds on hiring or production, neutering any economic impact.<\/p>\n \u201cThey\u2019re still in a world of uncertainty,\u201d Mr. Durante said of businesses, adding that the dynamic \u201chasn\u2019t shifted so much.\u201d<\/p>\n To impose his replacement tariffs, the Trump administration has opened investigations into dozens of other countries\u2019 trade practices under a provision of the 1974 Trade Act. Those inquiries are expected to result in tariffs similar in magnitude to those that the Supreme Court struck down. Mr. Trump has already applied a temporary 10 percent tariff on most imports using another section of the 1974 law.<\/p>\n