No Money Back Guarantees

The cost to the United States of the war against Iran is estimated to be $1 billion per day, not including the cost of Pete Hegseth’s hair gel for his daily pressers. Everett Dirksen once had something to say about this. If there was no choice in the matter, that would be one thing. But when it’s a war of choice, paying for it is an issue, especially after the indiscriminate evisceration of federal employees by DOGE, the wildly mounting federal deficit, the monumental increase in ICE funding, the ongoing rise in inflation and the cuts to Obamacare subsidies.

But hey, we’ve got hundreds of billions of free dollars from the tariffs that other countries are paying to the United States, we’ve been told. Except now that the tariffs have been held unconstitutional, as was almost certainly going to be the case (and will similarly be the case with the Section 122 tariffs as well), they’ve been ordered to be returned.

On Wednesday, the Court of International Trade ordered Customs and Border Protection to provide immediate refunds to importers who had paid the tariffs now invalidated by the Supreme Court. The administration is likely to appeal that ruling.

Does that mean we should wait by the mailbox for the check to arrive? Not so fast.

The administration could also try other tactics, like delaying “liquidation”—the technical term for Customs and Border Protection’s final decision regarding the accuracy of an importer’s customs entry, including the value of the goods and how they were categorized for tariff payments. That process is supposed to be finished within 314 days, but the treasury secretary has the power to delay liquidation by up to three years on certain entries, including to ensure “compliance with applicable law.”

In the meantime, big business has jumped into the fray to get their piece of the pie.

More than 2,000 businesses have already sued over the refunds—including some big names like FedEx and Costco. Still, the $175 billion of unlawfully collected IEEPA tariffs came from more than 300,000 different importers, according to government data reviewed by Bloomberg. Many, and probably most, of those businesses will lack the resources for a protracted legal fight over the refunds—particularly as they brace for the additional tariffs Trump announced in the wake of last month’s Supreme Court ruling.

Notably, lawsuits cost money, which is going to eat into any amount refunded. And while big payers like FexEx and Costco might be able to absorb the costs, small businesses don’t have it so easy.

Slow walking the refunds might be a deliberate strategy by the Trump administration, which seems to be preparing for a “war of attrition” against American small businesses, says Scott Lincicome, vice president of general economics at the Cato Institute.

If litigation over the refunds takes years, as Trump has suggested, then some businesses might decide it’s not worth paying thousands of dollars in legal fees to fight it out in court. That means the government might get to keep some of those unlawfully collected taxes just because it made the refund process so complicated and costly.

“You’re talking about a situation where it could take several years of litigation, and could even have to go back to the Supreme Court,” Lincicome says. “There is a chance this is going to leave out a lot of small businesses, and that’s really unfortunate.”

As for us consumers, from whom the money mostly came in the guise of higher prices to cover some, if not all, of the increased costs due to tariffs, don’t hold your breath. Despite the president’s economic illiteracy enabling his fantasy belief that tariffs are paid for foreign countries “who have been ripping us off for decades” by selling us inexpensive good, tariffs are a regressive tax, the kind that hits poorer consumers harder than the wealthy. But while Trump may not imbibe on Chateau Haut Brion, he is drunk on the $170 billion plus that’s largely come out of American pockets.

There’s no way to get that back, even if the government wanted to give it back. And it doesn’t. But that’s not the end of the consumer getting burned by this foray into economic fantasy.

It could also be unfortunate for taxpayers, who might end up on the hook for interest payments on those tariff refunds. In a response to the Court of International Trade this week, the executive director of the U.S. Customs and Border Protection’s office of trade told the Court of International Trade that “applicable law” requires that “any validated refund of IEEPA duties would include interest.”

Cato’s calculations show that the government could end up owing $23 million for every day that the refunds go unpaid. That’s $700 million per month and roughly $3 billion if courts grant the administration’s request for a 120-day delay in judgment.

Businesses like Costco might try to make good to its customers by lowering prices relative to its tariff refunds. Businesses like FedEx have the capacity to know from whom it collected tariffs when handling international shipments, but there’s no indication that FedEx will try to get the money back into the hands of the payers. As for small businesses, there is little expectation of anything coming their way.

If you don’t mind making a non-deductible charitable contribution to the war in Iran and the now-canned Kristi Noem’s various exploits, then you won’t have any issue with the failure of the government and businesses giving you your money back. But even such generosity to the MAGA cause has its limits, like the new Section 122 tariffs that are similarly illegal and similarly unlikely to ever find their way back to you when the court orders refunds. Or the tax increase that will inevitably come to pay for the government’s shortfall. Unlike refunds, that’s pretty much a guarantee.


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3 thoughts on “No Money Back Guarantees

  1. B. McLeod

    We’re not situated all that differently from the peasants who lived through the 100 Years War. We have no real say, and the state will be relying on us to pay the check.

  2. PK

    The cost-benefit isn’t checking out. If you told me to conquer Iran tomorrow, I’d ask for at least hundreds of tactical nukes or else I’d tell you it was impossible. If you think that’s crazy, General MacArthur wanted to deploy “30-50” in Korea after China intervened. We do not have the capacity to conquer Iran despite our great might.

    There’s no achieving “unconditional surrender” here. Unless America suddenly becomes something she is not and is willing to provide meat for the grinder. Yes, we’re wasting gobs of money. But at least we’re using the stuff we pay for is the only silver lining if that’s even one.

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