An Australian clothing company, Nashie, recently received a six-figure refund from the US government, including 6% interest, for tariffs it had paid on imports. It is one of thousands of businesses reclaiming duties imposed under what President Donald Trump called “Liberation Day.” Of the roughly US$166 billion due to be refunded, more than US$85 billion has already been returned to businesses. But a US Supreme Court ruling in February that reversed the tariffs has not undone the economic and political damage—and may not erase the Trump administration’s gains.
Tariffs Designed for Leverage, Not Longevity
Trump’s April 2025 tariffs relied on the International Emergency Economic Powers Act (IEEPA), a 1977 law that allows presidents to respond to extraordinary foreign threats but never mentions the word “tariff.” On February 20, 2026, the Supreme Court ruled 6-3 that IEEPA did not authorize tariffs: under the Constitution, only Congress can impose taxes and duties. The decision placed an important limit on presidential power but did not end Trump’s tariff policy, which was designed from the start to buy time to rewrite US trade relations.
Trump responded with a temporary 10% global tariff, set to expire on July 24 after the statutory 150-day limit. The administration has also shifted to other legal authorities, including Section 301 of the Trade Act of 1974, Section 232 on national security, and Section 307 on forced labor. These require investigations into foreign trade practices and lengthy procedures, slowing the process but creating a record that can be scrutinized in court. The US Trade Representative’s findings on alleged forced labor have prepared the ground for a 12.5% tariff on exports from 54 countries, including Australia, China, New Zealand, and the United Kingdom, starting July 24, 2026.
Fiscal and Political Costs
The refunds contributed to a US$120 billion federal deficit in June, a sharp contrast to the US$27 billion surplus in June 2025. However, the US$166 billion being paid out is less than 2% of projected 2026 federal spending. Politically, the refunds are less visible than the original tariff announcements, as they involve a technical process dispersed among many importers. Concessions that trading partners, including the UK and the European Union, made under the threat of higher tariffs do not automatically vanish when a tariff is struck down.
For businesses, repaying money they should never have paid does not recreate their pre-tariff position. Importers had capital tied up for months as financing costs mounted, orders were canceled, and inventory sat stranded. Many renegotiated contracts, paid customs brokers and lawyers, and delayed other investments. Some stopped shipping to the US altogether. Smaller firms were especially exposed, with one analysis estimating that small business importers in the US each paid US$306,000 extra in tariffs on average.
The Federal Reserve Bank of Atlanta estimates that “financially constrained” businesses will receive 34% of all refunds, or about US$56 billion. These firms are most likely to use the money to invest, hire staff, or reduce prices. Better-financed businesses are more likely to save it, repay debt, or distribute it to shareholders. PepsiCo said it would use the refunds to offset some commodity inflation. But few are likely to pass the refunds back to consumers due to complexity and cost. Nintendo is being sued by its own customers, who argue the tariff refunds should go to consumers to offset higher prices.
Access to refunds is also uneven. A business with a US bank account and customs broker can get its refund relatively smoothly. Australian businesses shipping via Australia Post face further delays: those shipments were not entered through the system US Customs and Border Protection uses for refunds, and no refund pathway exists yet. Nor does the refund necessarily reach whoever ultimately paid; it goes to the importer, even where the cost was passed on to a retailer or consumer through higher prices.
The Deeper Cost: Uncertainty
The most important consequence of Trump’s tariff policy is persistent uncertainty. Trump can impose immediate commercial disruption, then use that disruption as leverage in negotiations with other governments. The latest example is Monday’s 50% tariff on a range of Canadian goods, which the US says responds to Canadian retaliation and discrimination against US cars, dairy, and alcohol. Persistent uncertainty also encourages global commerce to fragment into competing blocs whose market access is more predictable.
As our Weaponized Trade project shows, the deeper danger is other governments adopting the same playbook: temporary, legally questionable trade restrictions becoming the norm rather than the exception. Litigation to roll back these measures takes months or even years. If a court does eventually invalidate a measure, the US can invoke another law and restart the process. Courts operate retrospectively. Markets, on the other hand, react to them immediately.
The Supreme Court ruling did not return lost customers, reverse commercial decisions, or restore confidence in predictable trade rules. Tariffs can be refunded. Uncertainty cannot. For Asian exporters—from Chinese manufacturers to Indian generic drug producers—the lesson is clear: the US trade environment remains volatile, and the region must prepare for a prolonged period of unpredictability. Trump Tariffs Threaten Indian and Chinese Generic Drug Imports to US and Seoul's Pragmatic Diplomacy Navigates Trump's Unpredictable Foreign Policy highlight the broader implications for the Indo-Pacific.
