The federal government is currently sitting on roughly $175 billion in cash that it has no legal right to keep. On February 20, 2026, the Supreme Court delivered a crushing 6-3 blow to the administration’s trade policy, ruling that the sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unauthorized and unlawful from the start. Chief Justice John Roberts, writing for the majority in Learning Resources, Inc. v. Trump, made it clear: the power to tax belongs to Congress, and the President cannot simply "regulate" his way into levying multi-billion dollar duties.
Yet, if you are an American importer expecting a check in the mail, you should probably settle in for a long winter. Despite the clear-cut legal victory, the Trump administration has signaled a pivot from aggressive collection to aggressive obstruction. The money is essentially being held hostage as the White House explores every procedural loophole to delay, offset, or outright deny the massive refunds owed to U.S. businesses.
The Strategy of Attrition
This is not a simple case of the government losing a court battle and opening the coffers. It is a calculated retreat into the tall grass of litigation. Within hours of the ruling, President Trump dismissed the idea of immediate repayment, telling reporters the issue would be "locked up in litigation for years." This isn't just rhetoric; it is a preview of the Department of Justice's defense strategy in the Court of International Trade (CIT).
The administration's stance is a jarring reversal of its previous assurances. Back in May 2025, when fighting for the right to collect these duties while the case was pending, government lawyers told the Federal Circuit that importers didn't need an injunction because they would be "fully protected" by refunds if the tariffs were eventually struck down. Now that the "eventually" has arrived, the tone has shifted to one of "prove it."
How the Government Plans to Keep Your Money
Treasury Secretary Scott Bessent has already begun framing the $175 billion as "in dispute," suggesting that the administration will wait for lower courts to dictate the exact mechanics of every single refund claim. This creates a massive bottleneck. Over 1,500 companies have already filed lawsuits, and tens of thousands more are now eligible to join the fray. By forcing each company to litigate its specific entries, the government can effectively delay payments until the clock runs out on smaller firms that lack the legal budget to fight a multi-year war.
There are three primary levers the administration is pulling to keep the cash:
- Liquidation Loopholes: U.S. Customs and Border Protection (CBP) typically "liquidates" or finalizes an import entry about 314 days after it occurs. If an importer didn't file a formal protest within 180 days of that liquidation, the government may argue the window is closed—even if the underlying law was unconstitutional.
- The Pass-Through Defense: Some officials are floating the idea that companies shouldn't get refunds if they already passed the tariff costs on to consumers. It’s a messy, legally dubious argument that would require individual audits of pricing structures, adding years of discovery to every case.
- The Section 122 Pivot: The most aggressive move came just 24 hours after the SCOTUS ruling. The President invoked Section 122 of the Trade Act of 1974 to impose a "temporary" 10% global tariff—later threatened to rise to 15%. By layering a new, technically "legal" tariff over the old, invalidated one, the administration is attempting a fiscal shell game. They may try to argue that any refunds owed from 2025 should be credited against the new 2026 duties, ensuring the money never actually leaves the Treasury's accounts.
The High Cost of Winning
For the mid-sized American manufacturer, this is a pyrrhic victory. The Supreme Court confirmed that the $10 million they paid in "Reciprocal Tariffs" last year was an illegal tax. However, to get that $10 million back, they must now navigate a labyrinth of Post-Summary Corrections and administrative protests.
The "Major Questions Doctrine," which the Court used to strike down the IEEPA duties, is a powerful shield against executive overreach, but it doesn't automatically write checks. The Court stayed silent on the "remedy"—the actual process of returning the money. This silence is exactly what the administration is exploiting.
Immediate Actions for Importers
The window for recovery is not just narrow; it is actively closing. Waiting for a "general refund order" from the White House is a losing strategy. Companies that have not already done so must immediately:
- Audit 2025 Entries: Identify every cent paid under IEEPA authority (specifically the "Reciprocal" and "Trafficking" duties) versus Section 301 or 232 duties, which remain in effect.
- Stop the Liquidation Clock: File protests for any entries that have liquidated in the last 180 days. For unliquidated entries, file Post-Summary Corrections (PSCs) to preserve the right to a refund.
- Review Supply Contracts: Downstream buyers who paid "tariff surcharges" to their suppliers need to look at their contracts now. If the supplier gets a refund from the government, who gets to keep it? Those fights will be just as bitter as the ones against the Treasury.
The administration is betting that the sheer scale of the $175 billion refund liability will make it "too big to pay." They are counting on the fact that for many businesses, the legal fees required to chase the refund will eventually outweigh the refund itself. This is no longer a debate about trade policy or constitutional law. It is a war of attrition over the largest pile of illegally collected tax revenue in American history.
Would you like me to draft a template for an administrative protest to CBP for your 2025 tariff entries?
