From Prada to FedEx: Why hundreds of major corporations are now demanding their tariff billions back from the US

A political earthquake and a bill in the billions: How the end of IEEPA tariffs is throwing the American economy into turmoil

On February 20, 2026, US trade policy experienced a watershed moment of historic proportions. In a landmark ruling, the United States Supreme Court placed a clear constitutional limit on the expansive use of presidential emergency powers. The highest court declared all tariffs levied since January 2025 under the International Emergency Economic Powers Act (IEEPA) unconstitutional. The justices' reasoning was unequivocal: tariffs are taxes and therefore fall under the sole jurisdiction of Congress according to Article I of the Constitution. What began as a seemingly clever instrument of presidential power turned out to be a serious legal blunder.

The consequences of this ruling are unprecedented. Suddenly, repayment claims of up to $175 billion are on the table – a sum that could even destabilize the US federal budget. Led by industry giants like FedEx, an unprecedented wave of lawsuits has formed. From automotive suppliers and retail giants like Costco to European luxury brands like Prada, hundreds of major corporations are demanding the return of billions of dollars in customs duties they paid.

But the case raises far bigger questions than just those of technical refunds. It touches the core of the US economy: While companies saw their profit margins shrink and inflation was noticeably fueled by high import costs, consumers are now also asking who is bearing the brunt of the economic damage. At the same time, the US government reacted with lightning speed and attempted to close the gigantic budget gap with a previously completely unused legal fallback – Section 122.

One thing is therefore beyond doubt: The era of unilateral IEEPA tariffs may have been ended by the Supreme Court, but the bitter fight for the billions and the future of the global trading order has only just begun.

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When the rule of law strikes back, the bill comes due and the cracks in the system become visible

By a six-to-three majority in the case of Learning Resources, Inc. v. Trump, the judges ruled that the International Emergency Economic Powers Act (IEEPA) does not grant the president any authority to unilaterally impose tariffs. The court made it unequivocally clear that tariffs are a form of taxation reserved exclusively for Congress under Article I of the U.S. Constitution. This ruling declared all tariffs imposed under the IEEPA since January 2025 unconstitutional at a stroke, from so-called reciprocal tariffs to trade duties based on drug enforcement. What began as a seemingly clever instrument of presidential power turned out to be a constitutional blunder with fiscal consequences of historic proportions.

FedEx opens the legal barrage

Just three days after the ruling, logistics giant FedEx took the first step, which can be interpreted as a signal for the entire American economy. On February 23, 2026, the company filed a lawsuit in the US Court of International Trade in New York against Customs and Border Protection (CBP) and the US government, demanding full repayment of all customs duties paid under the IEEPA, plus interest. The complaint stated that FedEx had imported goods from countries subject to IEEPA tariffs and suffered direct financial losses as a result. While the exact amount of the claim was not disclosed, the company had already admitted in September 2025 that US trade policy would reduce its annual profits by approximately one billion dollars, a significant portion of which was attributable to IEEPA tariffs. Compared to the previous year's adjusted operating profit of 6.1 billion dollars, this represents a profit decline of about 16 percent solely due to the tariff policy now declared unconstitutional.

FedEx is represented by the major Washington law firm Crowell and Moring, which has made a name for itself in the field of international commercial law and is already handling at least 150 similar cases before the Commercial Court. FedEx's lawsuit is considered the first by a major American corporation since the February 20 ruling, but it will almost certainly not be the last.

The wave of lawsuits began even before the verdict

The legal battle over the IEEPA tariffs did not begin with the Supreme Court ruling. As early as November 2025, dozens of prominent companies had filed so-called injunctions with the Court of International Trade to secure their refund claims before Customs and Border Protection (CBP) could finalize their import transactions and thus forfeit any potential refund claims. Between November and December 2025, over 2,000 such injunctions were filed, supported by more than 301,000 affected importers with a total of approximately 34 million import transactions.

The most prominent plaintiffs include companies from a wide range of industries. Tire manufacturer Yokohama Tire and Japanese machine tool manufacturer Yamazaki Mazak kicked things off on November 10, 2025. They were followed by motorcycle manufacturer Kawasaki on November 13, cosmetics company Revlon on November 14, canned goods manufacturer Bumble Bee Foods on November 18, and several Toyota subsidiaries on November 21. On November 26, aluminum giant Alcoa and eyewear manufacturer EssilorLuxottica, parent company of Ray-Ban, joined the plaintiffs. The retail giant Costco garnered the most media attention before the Supreme Court ruling, filing its lawsuit on November 28, 2025, arguing that roughly one-third of its US sales were based on imported goods and that the IEEPA tariffs had never had a legal basis.

In December 2025 and January 2026, the lawsuit expanded to include tire manufacturer Goodyear, automotive supplier BorgWarner, camera brand GoPro, fruit company Dole, and fashion chain J. Crew. Other well-known names on the plaintiffs' side include shoe company Crocs, cosmetics brand Elizabeth Arden, sunglasses brand Oakley, Japanese technology company Ricoh, plumbing specialist Ferguson Enterprises, fitness equipment manufacturer iFit, solar panel manufacturer LONGi Solar Technology, and steel recycler Radius Recycling.

Luxury brands and large corporations are jointly taking legal action

In addition to the companies already mentioned, the wave of lawsuits has also engulfed the luxury industry. The law firm Klestadt Winters Jureller, a boutique firm specializing in international trade law with approximately 40 lawyers, has filed over 300 lawsuits, including those on behalf of the Italian fashion houses Prada and Dolce & Gabbana. The large law firm Sidley Austin is simultaneously conducting more than 150 proceedings for clients such as the genetic diagnostics company Illumina, the spirits company Diageo, the fruit producer Dole, and the fashion chain J. Crew. Overall, a picture is emerging in which not only import-dependent retailers and industrial companies are suing, but also technology companies, automotive suppliers, food producers, and luxury brands. The breadth of this coalition underscores how profoundly the IEEPA tariffs have impacted the American economic structure.

$175 billion: The fiscal dimension of the ruling

The potential refund claims are on a scale that is noticeable even to the US federal budget. The Penn Wharton Budget Model of the University of Pennsylvania, a nonpartisan fiscal policy research institute, puts the total amount of tariffs collected under the IEEPA at at least $175 billion. This model covers approximately 11,000 product categories based on eight-digit tariff codes from 233 countries and calculates that the IEEPA tariffs recently generated over $500 million in gross revenue per day. Customs and Border Protection (CBP) itself last released data on December 14, 2025, indicating a total risk amount of $133.5 billion since the introduction of the first IEEPA tariffs. This sum is roughly equivalent to 2.5 percent of the total US federal budget and exceeds the federal government's annual transportation expenditures.

To put this figure into perspective: According to estimates by PNC Financial Services, IEEPA tariffs accounted for roughly 60 percent of all tariffs levied under the Trump administration. Without them, the effective average US tariff rate fell from approximately 16.9 percent to 9.1 percent, which is still the highest level since 1946, excluding the exceptional year of 2025. The fiscal gap created by the loss of IEEPA revenue is therefore enormous, forcing the government to choose between massive budget deficits and a protracted legal battle over repayment.

Who pays the bill: The dilemma of reimbursement

The technical processing of refunds is anything but trivial. While the Supreme Court declared the IEEPA tariffs unconstitutional, it explicitly refrained from issuing any instructions regarding refunds, instead referring the case back to the Court of International Trade. The government, for its part, has indicated that it may challenge refund claims in court, despite having committed in principle to refunds following a final judgment in a stipulation on January 8, 2026.

For importers with imports that have not yet been finalized and for which customs assessment has not yet taken place, refunds via the electronic CBP system should be relatively straightforward. It becomes more complicated for already finalized, so-called liquidated import transactions. Here, companies must obtain individual court rulings, which significantly delays and increases the cost of the process. Adding to the complexity, the 180-day period for administrative appeals for early IEEPA imports from January and February 2025 may already have expired in some cases.

Justice Brett Kavanaugh, who voted against the ruling, warned that same day of the chaotic consequences. The United States could be forced to refund billions of dollars to importers who had already passed the costs on to consumers. This warning strikes a nerve. Because if companies have already passed on their customs costs to end customers in the form of higher prices, the fundamental question arises whether refunding the importers is economically just, or whether the real victims—the consumers—should be left empty-handed.

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The economic damage: inflation, loss of purchasing power and slowdown in growth

The economic consequences of the IEEPA tariffs extend far beyond the immediate issue of refunds. The Yale Budget Lab calculated that the totality of tariffs imposed under Trump increased consumer prices by 1.2 percent in the short term, which translates to an average loss of purchasing power of about $1,700 per household and $900 for low-income households. With the removal of the IEEPA tariffs, this effect reduces to 0.6 percent, or about $800 per household, reflecting the impact of the remaining tariff regimes.

Goldman Sachs quantified the inflation-boosting effect of the tariffs at 0.7 percentage points over a ten-month period and predicted that an additional 0.1 percentage points would be added in 2026. The Kiel Institute for the World Economy determined that foreign exporters absorbed only about four percent of the tariff burden, while 96 percent was borne by American buyers. According to official data, inflation was 2.7 percent in 2025 and is expected to remain at a similar level in 2026, although it could have been significantly lower without the tariff policy.

Particularly revealing is Morningstar's finding that import prices, including tariffs, rose by almost 10 percent in 2025, while core consumer goods prices increased by only about one percentage point. This means that US companies initially financed a large portion of the tariffs from their own margins and depleted their pre-acquired inventories. However, these buffers are now largely exhausted, and many companies have already announced further price increases for 2026. The Yale Budget Lab estimates the long-term damage to US GDP at a permanent decrease of 0.1 percent, which equates to roughly $30 billion in lost economic output annually.

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Section 122: The last resort as a backup weapon

The Trump administration reacted to the ruling with remarkable speed. On the same day, the president signed an executive order rescinding all IEEPA tariffs and simultaneously a proclamation introducing new import duties under Section 122 of the Trade Act of 1974. This section allows the president to impose a global import surcharge of up to 15 percent for a maximum of 150 days in the event of fundamental international balance of payments problems. Initially set at 10 percent, the rate was raised to the legal maximum of 15 percent the very next day.

This emergency measure is remarkable for several reasons. First, Section 122 has never been applied in its nearly fifty-year history, meaning there is virtually no case law on relevant concepts such as fundamental international balance-of-payments problems. Second, the measure is strictly time-limited and will automatically expire on July 24, 2026, unless Congress approves an extension. Third, the law explicitly prohibits the targeted protection of individual industries and requires broad and uniform product coverage. Critical minerals, energy commodities, pharmaceuticals, goods covered by the USMCA trade agreement, and goods already taxed under Section 232 are exempt from the new tariffs.

The administration has simultaneously announced the initiation of new investigations under Sections 301 and 232 to establish a long-term legal basis for increased tariffs. Whether this strategy will withstand constitutional scrutiny remains to be seen. The irony lies in the fact that the very judicial restriction imposed by the Court of International Trade that prompted the inclusion of Section 122 in the law—namely, President Nixon's unchecked imposition of tariffs in 1971—now presents itself as a compelling historical parallel.

The democratic counterattack in the Senate

In parallel with the wave of lawsuits from businesses, 22 Democratic senators introduced the Tariff Refund Act of 2026 on February 23, 2026. This legislation would require the government to fully refund all IEEPA tariffs, plus interest, within 180 days. The bill was spearheaded by Senate Minority Leader Chuck Schumer, along with Senators Ron Wyden (a senior Democrat on the Finance Committee), Ed Markey (on the Small Business Committee), and Jeanne Shaheen (on the Foreign Relations Committee). The bill stipulates that Customs and Border Protection (CBP) will prioritize refunds for small businesses. It also includes a policy statement requiring importers and wholesalers who passed on tariff costs to consumers through higher prices to also pass these refunds on to their customers.

The chances of success for this legislative initiative are slim, however. Democrats are in the minority in the Senate and would need Republican votes, which are unlikely to materialize. The House of Representatives is under Republican control, and its Speaker, Mike Johnson, has already dismissed the issue, stating that the White House must resolve it. Nevertheless, the bill serves a political purpose. It establishes a clear position for Democrats as advocates for the businesses and consumers affected by the tariffs and increases public pressure on the government to initiate an orderly refund process.

The legal chronology of a power struggle

The history of the IEEPA tariff dispute illustrates the speed with which this constitutional crisis unfolded. On February 1, 2025, President Trump declared a national emergency by executive order due to drug trafficking and trade deficits, using this as the legal basis for IEEPA tariffs. What began as a targeted measure against individual trading partners was quickly expanded, first to Canada and Mexico in March 2025, then on April 2, 2025, with the so-called Liberation Day, to virtually all US trading partners. At times, IEEPA tariffs accounted for approximately 50 percent of all US tariff revenue.

The legal counterattack came in May 2025, when the Court of International Trade, in the case of VOS Selections, Inc. v. Trump, first declared the IEEPA tariffs unlawful. The government appealed, but in August 2025, the Federal Circuit Court of Appeals upheld the decision in full. On September 9, 2025, the Supreme Court accepted the case on expedited proceedings, with oral arguments held on November 5, 2025. On January 8, 2026, the government recorded its willingness in principle to reimburse the costs after a final judgment. The final ruling of February 20, 2026, then brought to a close a legal battle that had tested the separation of powers in the United States.

What's at stake: The tectonic shifts in the US trading system

The significance of the Supreme Court ruling extends far beyond the immediate issue of tariff refunds. It sets a clear constitutional limit on the expansive use of presidential emergency powers in trade policy and strengthens Congress's original authority over taxes and duties. For the international trade community, this signifies a period of heightened uncertainty, as the Trump administration has unequivocally signaled its intention to continue tariff policies under different legal grounds.

The practical consequences for businesses worldwide are significant. Importers who have paid IEEPA duties must now actively pursue their refund claims, either administratively through CBP or by filing individual lawsuits in commercial court. Automatic refunds are not currently planned. The costs of legal counsel and litigation could be prohibitive, especially for small and medium-sized enterprises, raising the question of whether the actual refund rate will fall significantly short of the theoretically justified $175 billion.

A dilemma arises for the US federal budget. On the one hand, the government may owe importers hundreds of billions of dollars in repayments. On the other hand, the new Section 122 tariffs are intended to compensate for the lost revenue, but are limited to 150 days and are legally vulnerable. While the announced investigations under Sections 301 and 232 could enable new tariffs in the long term, they require time-consuming administrative processes and are themselves legally contestable. Goldman Sachs reaches the sobering conclusion that the overall economic impact of tariff policy will change little despite the ruling, because the administration is attempting to compensate for the lost IEEPA tariffs through other means.

The wave of lawsuits from FedEx, Costco, Revlon, and hundreds of other companies marks a turning point. It demonstrates that American businesses are no longer willing to accept a trade policy pursued behind Congress's back and on constitutionally dubious grounds. The coming months will reveal whether the refunds actually materialize, how the government closes the resulting budget gap, and whether the promise of higher tariffs under different legal frameworks will hold up in court. One thing is already certain: The era of unilateral presidential tariff policy under the IEEPA is over, but the battle for the future of American trade policy has only just begun.

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