$175 billion back – How a court ruling is shaking up American trade policy
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Published on: March 8, 2026 / Updated on: March 8, 2026 – Author: Konrad Wolfenstein
$175 billion back – How a court ruling is shaking up American trade policy – Image: Xpert.Digital
The most expensive slap in the face in the history of US commercial law
Historic defeat for Trump: Why the US now has to pay back billions
It is an unprecedented legal earthquake with gigantic financial consequences: The US Supreme Court has declared Donald Trump's sweeping import tariffs unconstitutional, inflicting a historic defeat on American trade policy. The repercussions are monumental, as the US government now faces a massive wave of repayments totaling around $175 billion to affected companies – an amount that will significantly burden the entire US federal budget. While the ruling unequivocally redefines the limits of presidential power, the Trump administration is already preparing a legal "Plan B" to continue its protectionist course. What began as aggressive economic policy has developed into a fiscal catastrophe that poses entirely new challenges not only for American importers but also for trading partners in Europe.
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Billions in compensation for companies: What the historic US tariff ruling means now
It is a defeat of historic proportions for the Trump administration. On February 20, 2026, the United States Supreme Court, by a vote of six to three, declared the sweeping import tariffs imposed by President Donald Trump under the International Emergency Economic Powers Act (IEEPA) unlawful. Two weeks later, a federal judge at the New York Commercial Court ordered Customs and Border Protection to reimburse the affected importers for the overpaid amounts, plus interest. This threatens the US federal budget with a repayment burden of approximately $175 billion—about 2.5 percent of the total federal budget. What began as aggressive trade policy has ended as a legal and fiscal catastrophe.
The Supreme Court's decision is not merely a legal ruling, but a constitutional signal of fundamental importance. The court made it unequivocally clear that the power to impose tariffs lies with Congress – not the president. The 1977 emergency law, which Trump had invoked, does not allow the head of state to unilaterally impose tariffs. This effectively declared a key instrument of Trump's trade policy unconstitutional.
The path to judgment
The story begins on April 2, 2025, a day Trump himself dubbed Liberation Day. On that day, the president announced so-called reciprocal tariffs on goods from nearly all of the US's trading partners, invoking the International Emergency Economic Powers Act to address what he termed a national emergency related to US trade deficits. However, the United States had already been running trade deficits for decades, which made the invocation of an acute emergency questionable from the outset.
Over the following months, the US government levied more than $130 billion in tariffs based on the IEEPA. Economists using the Penn Wharton Budget Model at the University of Pennsylvania even estimated total revenue from IEEPA-based tariffs at up to $175 billion. The tariffs affected virtually all industries and trading partners and became a central element of an economic policy that favored confrontation over cooperation.
The case, brought by Learning Resources, Inc. v. Trump, eventually reached the Supreme Court through various legal avenues. In his ruling of February 20, 2026, Chief Justice John Roberts, who authored the majority opinion, argued that no president in the entire half-century history of the IEEPA had ever invoked the law to impose tariffs—let alone tariffs of this magnitude and scope. This lack of historical precedent, combined with the breadth of authority claimed by the president, indicated that the tariffs exceeded the president's legitimate powers.
Applying the so-called Major Questions Doctrine, the court found that the president was claiming extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope. Given the breadth, history, and constitutional context of this claimed authority, he would have had to demonstrate clear authorization from Congress—which he had failed to do.
The three dissenting justices – Kavanaugh, Thomas and Alito – warned in their dissenting opinion that the preliminary effects of the decision could be substantial and that the government might have to refund billions of dollars to importers who had paid the IEEPA tariffs.
The repayment machinery is getting started
Although the Supreme Court had declared the tariffs illegal, it had not ruled on the specific repayment mechanism, leaving this question to the lower courts. On March 5, 2026, the United States Court of International Trade took up this implementation issue. Justice Richard Eaton ordered that all importers benefit from the Supreme Court's ruling and are entitled to a refund.
Customs and Border Protection has been ordered to recalculate the import duties for millions of shipments, excluding the disputed tariffs, and to refund any overpayments with interest. At the same time, the agency must immediately cease collecting IEEPA duties on goods still undergoing liquidation. For goods where the liquidation process is complete, the duties must be retroactively deducted.
The scale of the task is unprecedented. More than 300,000 importers are affected, and Customs and Border Protection has stated in court documents that manual review of more than 70 million entries may be necessary. Around 2,000 refund claims have already been filed with the Commercial Court. Companies like FedEx have initiated their own legal proceedings. At a hearing, the court will seek information on the agency's specific repayment plans.
For companies, the following applies: Importers generally have 180 days after the liquidation of their imports to formally file an objection and apply for refunds. After this period, the liquidation is legally final. Legal experts recommend that affected companies immediately conduct a comprehensive review of all customs duties paid since the beginning of 2025, assert their administrative refund claims, and meticulously adhere to all deadlines.
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Despite court ruling: Trump uses this trick to simply continue imposing tariffs
The new customs front – the government's Plan B
Immediately after the Supreme Court ruling, the Trump administration responded with an executive order rescinding all IEEPA-based tariffs. However, this repeal was only temporary. By the end of February 2026, the administration had imposed new worldwide tariffs, this time based on Section 122 of the Trade Act of 1974.
This legal basis allows for additional tariffs of up to 15 percent for a maximum period of 150 days – after which congressional approval would be required. Initially, the new tariffs were set at ten percent. US Treasury Secretary Scott Bessent announced in an interview with CNBC in early March that the increase to 15 percent would likely take effect that same week. US Trade Representative Jamieson Greer specified that the tariffs would rise to 15 percent for some countries and could potentially be even higher for others.
The new round of tariffs is temporary, based on the 1974 Trade Act, and is expected to remain in effect until July 24, 2026. Bessent stated that in the medium term, the government intends to return to the country-specific tariff rates that were in place before the Supreme Court ruling. He is confident that tariffs will be back to their previous levels within five months, based on investigations into alleged unfair trade practices and violations of national security.
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Europe between negotiation and confrontation
The escalation of US tariff policy poses a particular challenge for the European Union. In the summer of 2025, the EU and the US concluded a trade agreement that stipulated a maximum tariff of 15 percent on most European products. Current tariffs for EU products average 4.8 percent. An increase in the special tariff to 15 percent, as announced by Bessent, would represent a clear breach of this agreement.
The European Commission is therefore trying to secure an exemption for the EU from the announced tariff increase. Brussels stated that an agreement exists and that it is expected to be honored. However, the EU itself has not yet fully implemented the agreement. The Commission had pledged to eliminate European tariffs on US industrial products, but the European Parliament has suspended its work on implementation in response to the new US tariffs.
Chancellor Friedrich Merz met with Trump in Washington at the beginning of March and subsequently reported positive signals for a swift implementation of the EU trade agreement. Whether these signals will translate into concrete results remains to be seen. The US government has distinguished itself in recent weeks by issuing contradictory statements regarding the amount and timing of the tariff increases.
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The fiscal consequences
The repayment of $175 billion plus interest places a considerable burden on the US federal budget. This amount is equivalent to approximately 2.5 percent of the federal budget. It exceeds, for example, the entire budget of the US Department of Education and is comparable to the annual expenditures of the Department of Homeland Security.
The US government has signaled its intention to delay or prevent refunds. However, the ruling by the New York Trade Court is likely to significantly complicate this strategy. The order to recalculate the tariffs without considering the IEEPA surcharges and to refund the difference with interest is legally binding.
In addition, the repeal of the IEEPA tariffs will also eliminate future tariff revenues. According to the Penn Wharton Budget Model, tariff revenues will fall by approximately half without a replacement source. While the new tariffs based on the 1974 Trade Act offer partial compensation, they are subject to a 150-day time limit and a 15 percent cap.
A precedent with global impact
The Supreme Court's ruling sends an unambiguous signal: the separation of powers also applies to trade policy. The president cannot unilaterally impose tariffs of unprecedented scope and magnitude without clear authorization from Congress. While this clarification may seem legally obvious, in practice the Trump administration had acted in the opposite way for months – generating more than $130 billion in revenue that is now considered illegal.
For the international trade community, the ruling provides a degree of legal certainty, albeit coupled with considerable uncertainty about the coming months. The US government's willingness to immediately resort to alternative legal bases demonstrates that its protectionist course will continue even after a defeat before the highest court. The methods may change, but the direction remains the same. For companies on both sides of the Atlantic, this means: short-term planning, legal vigilance, and a readiness to adapt to rapidly changing conditions.
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