SCOTUS Rejected Tariffs on U.S. Products and the US has to Refund Them

Additional nontechnical information on tariffs in the United States

EconoFact: Tariff Payback

Tariff Payback

This week, the Trump administration began accepting requests for refunds of more than $166 billion in tariff payments following the Supreme Court’s February ruling:

“the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs.”

Who Benefits:

But while the refunds could provide relief to importers, they are unlikely to directly compensate consumers who may have faced higher prices because of the duties. This Weekend Reading presents  EconoFact memos and podcasts on the costs, price effects, and policy uncertainty of tariffs, and whether they realized their stated goals of spurring jobs, raising tax revenue, and rebalancing trade. 

Tariff Functions

Tariffs are paid to the government by importers when goods enter the country, but this does not determine who ultimately bears the cost of these taxes on imports. There could be some combination of:

How Tariffs Impact Retailers and Consumers

Alberto Cavallo analyzes the effects of tariffs on consumer prices in his tariff tracker, as part of the Harvard Business School Pricing Lab. He discusses this project and its results in the EconoFact Chats podcast episode “The Impact of Tariffs on Prices.” 

He found tariffs have little effect on prices set by foreign exporters but were associated with U.S. retailers reducing their margins and consumers paying higher prices. Thus, tariff revenues came out of the pockets of American businesses and consumers, not foreign companies, contrary to what was promised. Cavallo also notes that tariffs can raise the prices of domestically-produced goods if those goods use imported inputs or compete with imports whose prices have risen. The higher prices of domestic goods provide no tariff revenues, in contrast to what would happen with an across-the-board sales tax. 

Cavallo, Paola Llamas, and Franco Vazquez subsequently updated their analysis on the extent to which costs associated with tariffs were passed through to higher consumer prices in the EconoFact memo “Are Tariffs Raising U.S. Retail Prices?” 

Daily Online Pricing

They report their analysis of daily online prices for more than 350,000 products sold by five major U.S. retailers shows prices began rising shortly after the broader tariff measures were announced in March and continued to increase gradually. Between March and September, prices of imported goods rose by 5.4%  and prices of domestic goods rose by 3% relative to pre-tariff trends. They estimate tariff-related price increases contributed about 0.7 percentage points to the 3.0 percent overall inflation in September 2025.

Jobs

One motivation for tariffs was to spur jobs in the United States.  However the past year has experienced a loss of 75,000 manufacturing jobs. One reason could be the tariffs on imported inputs (such as steel) can raise the cost of production for American companies. An analysis by Lydia Cox and Katheryn Russ in “Will Steel Tariffs Put U.S. Jobs at Risk?” shows the number of jobs using steel outnumber those producing steel by about 80 to 1.

Uncertainty

Another reason could come from the uncertainty due to the on-again, off-again nature of tariffs, even before the Supreme Court ruling. As emphasized by Nicholas Bloom in “Understanding and Measuring Uncertainty,” a more volatile business environment makes planning difficult and causes companies to pull back on hiring and investing. 

In the EconoFact Chat episode from November 2025, “Assessing the Impact of the ‘Liberation Day’ Tariffs,” Chad Bown illustrates this through auto industry examples involving rules-of-origin requirements, bilateral negotiations, and new industry-specific tariffs. Shifting rules create added paperwork and compliance costs for firms, especially those that rely on complex supply chains.  

Reduce Tariff Impact

The Administration has stated, a central reason for tariffs is to reduce the United States trade deficit. In “Tariff Wars and the United States Trade Deficit,” Christopher Towe points out the United States has run trade deficits for decades. By definition, this reflects a shortfall of national savings relative to investment. Low national savings reflect low savings rates (and high consumption rates) by households, along with the government’s budget deficit. He also cites a range of research, including a recent study by the Federal Reserve Bank of Dallas that finds no correlation between trade balances and effective tariff rates for a wide set of countries. 

The Supreme Court ruling on the IEEPA tariffs is unlikely to be the last word in this story. In “The US Economy at a Time of Disruptions: War, Oil, Tariffs, and the Fed,” a discussion that took place after the Supreme Court ruling.

The panel of journalists Binyamin Appelbaum, Larry Edelman, Scott Horsley, and Claire Jones noted that after the ruling, the administration quickly moved toward across-the-board replacement tariffs under a different authority. 

EconoFact: The costs, price effects, uncertainty, and broader economic aims of tariffs.