The $166 Billion Tariff Refund: Who Paid, Who Gets Paid
The $166 Billion Tariff Refund: Who Paid, Who Gets Paid
When the Supreme Court struck down the IEEPA tariffs, about $166 billion in duties became refundable, and $122 billion had been certified for payment by September. The money goes back to the companies that paid at the border, not to the businesses and households who paid higher prices. The refund is a rare, clean test of who really bears a tariff.
What you'll learn
A tax that was never lawful
On February 20, 2026, the Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the President to impose tariffs. The ruling voided the 2025 tariffs imposed under that statute, including the so-called reciprocal tariffs on most trading partners and the tariffs on Canada, Mexico and China tied to drug trafficking. About two weeks later, the Court of International Trade ordered Customs and Border Protection to reprocess affected entries without the IEEPA duties, for every importer of record, whether or not it had sued.
The result is one of the largest refunds in American fiscal history. Industry trackers drawing on CBP court filings put IEEPA duties collected between February 2025 and February 2026 at about $166 billion, across roughly 330,000 importers and 53 million entries. CBP built a new system, known as CAPE, to process claims; the first payments went out in May 2026, and by mid-September about $122 billion had been certified for payment. A further phase, covering importers whose entries had already been finally liquidated and who had sued, was scheduled for October.
Sources: CBP declarations to the Court of International Trade as compiled by industry trackers. Certified amounts have been sent to Treasury for disbursement and are not confirmed receipts by importers.
The refund raises a question that economists rarely get to answer so cleanly: who actually paid the tariffs, and who is getting the money back? The answers are not the same, and the gap between them is a lesson in how costs move through supply chains and in the working capital of the businesses caught in between.
Who paid
A tariff is legally paid by the importer of record when goods clear customs. Economically, it is paid by whoever ends up bearing the higher price: the foreign exporter, if it cuts its price to offset the duty; the importer, if it absorbs the cost; or the importer's customers, if it passes the duty on. The incidence of any charge depends on the bargaining power and price sensitivity of each party, not on who writes the check.
The research on the 2018 and 2019 tariffs is unusually consistent. Mary Amiti, Stephen Redding and David Weinstein found that the tariffs were passed through almost completely to U.S. import prices: foreign exporters did not cut their prices, so American buyers bore the cost. Pablo Fajgelbaum, Pinelopi Goldberg, Patrick Kennedy and Amit Khandelwal reached the same conclusion and estimated substantial losses to U.S. consumers and firms that buy imports. Alberto Cavallo, Gita Gopinath, Brent Neiman and Jenny Tang found near-complete pass-through at the border but more mixed pass-through at retail, meaning that importers and retailers absorbed part of the cost in their margins for a time.
Early evidence on the 2025 tariffs pointed the same way. Foreign exporters largely held their prices; the cost fell on American importers, who then passed part of it on to business and household customers through price increases, surcharges and smaller discounts.
Who gets paid back
The refund follows the legal incidence, not the economic one. It goes to the importer of record that deposited the duties. A business that bought imported goods from a distributor and paid a tariff surcharge gets nothing from CBP. Neither does a household that paid more at a store. Whether those buyers can recover anything depends on their contracts: a supply agreement with an explicit tariff pass-through clause and a refund provision may give a claim against the importer; most purchase orders do not.
That produces a large, uneven transfer. Importers who passed duties through to customers receive a refund of money their customers paid. Importers who absorbed the duties are made whole. Customers who paid surcharges are not. The aggregate refund is not a measure of relief to the businesses and households that bore the tariffs. It is a measure of cash returning to the companies that sat at the border.
A small importer, worked
Consider a small importer that brings in $2.4 million of goods a year at customs value and paid IEEPA duties at an average effective rate of 20% for ten months. Its duties total $400,000.
| Item | Amount |
|---|---|
| IEEPA duties deposited over ten months | $400,000 |
| Financing cost: duties carried on a 9% line of credit for an average of nine months | $27,000 |
| Share passed through to customers, if pass-through was 80% | $320,000 |
| Refund to the importer of record | $400,000 |
Two things stand out. First, the tariff was a working capital shock before it was a cost. Duties are due when goods enter, months before they are sold and paid for, so a small importer financed $400,000 of deposits on top of its inventory. At 9%, carrying them for an average of nine months cost about $27,000, a real loss that the refund of the principal does not by itself repay. Our analysis of the timing mismatch between paying and being paid explains why this hits small firms hardest.
Second, if the importer passed 80% of the duties through to customers, $320,000 of its $400,000 refund is money its customers paid. Absent contractual obligations, it keeps the full refund. For many small importers the refund will be the largest single cash inflow of their year.
Methodology and assumptions
The importer is hypothetical. Duties equal $2.4 million of annual imports times ten-twelfths times a 20% effective rate. Financing cost assumes duties are drawn on a 9% line and carried for an average of nine months before refund; it ignores any interest the government pays on the refund, which depends on entry status and should be confirmed with a customs broker. The 80% pass-through share is illustrative, within the range of published estimates. Refund pool figures come from CBP court declarations as compiled by industry trackers and may be revised.
What the refund means for credit
The refund wave has several consequences that lenders and borrowers should understand.
- Liquidity, not profitability. A refund strengthens a borrower's balance sheet once, but it is not recurring revenue. Lenders analyzing 2026 financial statements should separate refunds from operating income, and borrowers should not expect a refund-inflated year to support a larger permanent credit line. Our guide to working capital ratios shows how a one-time inflow can distort them.
- Refund claims as collateral. Before payment, a refund claim is a receivable from the federal government. Some importers have borrowed against or sold their claims, at a discount, to get cash sooner. That can make sense for a business under strain, but the discount is effectively an interest rate and should be compared with the cost of waiting.
- Downstream disputes. Businesses that paid tariff surcharges to suppliers may seek to recover them. Expect contract disputes, and expect suppliers to use refunds to repair relationships through credits or price concessions. Our guide to negotiating supplier terms is relevant here.
- Tariffs did not disappear. The administration imposed a temporary 10% global tariff under Section 122 of the Trade Act of 1974, which by statute can last no more than 150 days, and continues to rely on other authorities such as Sections 232 and 301. Importers still face duty deposits on many goods, and the working capital problem persists.
The lesson about legal and economic incidence
The refund is a natural experiment in a principle that applies across finance. Whoever writes the check is not necessarily the one who pays. Card fees split across parties, payroll taxes, interchange and late fees all follow the same logic: the burden settles where bargaining power is weakest. When a charge is reversed, though, the money flows back along legal lines. Policymakers designing refunds or rebates rarely have the information to reverse the economic burden, and courts are not set up to try.
For small businesses, the practical lessons are concrete. Contracts should say what happens to surcharges if the underlying charge is refunded. Cash flow plans should treat government charges that are legally contested as contingent, and forecasts should model the possibility of both paying and being repaid. And companies that import directly, even in small amounts, should know who their customs broker is and whether their entries are in the refund pipeline.
The other side
The case that importers deserve the full refund is not frivolous. Importers bore the legal obligation, financed the deposits, carried the risk that the duties would never be returned and, in many cases, absorbed part of the cost in their margins while competitors who sourced domestically gained share. Unwinding pass-through to every downstream buyer would be administratively impossible, and attempting it would delay refunds for years. Some economists also note that refunds will partly flow through to customers anyway, as importers compete by lowering prices or restoring discounts. The fairness concern is real, but the legal design, refund the party that paid the government, is the only one that can be administered at this scale. What remains open is how much of the windfall reaches the businesses and households who bore the cost through higher prices, which will depend more on competition in each market than on anything the courts decide.
Frequently asked questions
The importer of record, not downstream buyers.
About $166 billion collected; $122 billion certified by mid-September 2026.
Mostly American importers and their customers.
It is usually treated as one-time, not recurring, income.
Key takeaways
- The Supreme Court held on February 20, 2026, that IEEPA does not authorize tariffs.
- About $166 billion in IEEPA duties is refundable; $122 billion was certified by September 11, 2026.
- Research shows tariffs pass through almost fully to U.S. buyers rather than foreign exporters.
- Refunds go to importers of record; customers who paid surcharges generally get nothing.
- In the example, a small importer paid $400,000 in duties and about $27,000 to finance them.
- Lenders should treat refunds as one-time liquidity, not recurring income.
- Contracts should specify what happens to surcharges if a charge is refunded.
References
- Learning Resources, Inc. v. Trump, No. 24-1287 (U.S. February 20, 2026).
- International Emergency Economic Powers Act, 50 U.S.C. §§ 1701–1708; Trade Act of 1974 § 122, 19 U.S.C. § 2132.
- U.S. Court of International Trade, order directing reliquidation of IEEPA entries (March 4, 2026); U.S. Customs and Border Protection, IEEPA duty refund declarations (2026).
- Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The Impact of the 2018 Tariffs on Prices and Welfare. Journal of Economic Perspectives, 33(4), 187–210.
- Fajgelbaum, P. D., Goldberg, P. K., Kennedy, P. J., & Khandelwal, A. K. (2020). The Return to Protectionism. Quarterly Journal of Economics, 135(1), 1–55.
- Cavallo, A., Gopinath, G., Neiman, B., & Tang, J. (2021). Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy. American Economic Review: Insights, 3(1), 19–34.
This analysis is educational and does not constitute legal, tax or customs advice. Refund amounts and processes reflect court filings and industry tracking available at the time of writing and may change. The importer example is hypothetical. Consult a licensed customs broker or trade counsel about specific entries.