A Hundred and Twenty Six Billion Dollars of Tariffs Has Already Gone Back

When the Supreme Court ruled in February that the International Emergency Economic Powers Act does not authorise tariffs, the decision was reported as a constitutional story about presidential authority. The financial consequence is arriving now, and it is one of the largest reversals of collected federal revenue on record.

Customs and Border Protection initially estimated about $166 billion of duties collected unlawfully, across roughly 53 million entries and 330,000 importers. As of early October, about $126 billion of duties plus interest had been refunded, with $136.6 billion accepted for processing.

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How money this large gets returned

Refunds of this scale do not happen in one payment. Customs built a phased process, and which phase an entry falls into determines whether its importer has been paid.

The first phase covered unliquidated entries and those within a limited window after liquidation, which is the easiest category because the paperwork is still open. The second covered certain reconciliation entries. The third launched on October 6 and reaches finally liquidated entries, the ones whose customs treatment had already been settled and closed, which is the category most people assumed was unrecoverable.

That third phase currently applies only to importers with pending litigation and a court order directing reliquidation. Entries caught up in antidumping or countervailing duty proceedings remain suspended until the Commerce Department issues instructions. So the refund you are entitled to and the refund you have received are still different numbers for a large share of importers.

The class action that changes who gets paid

Whitmore's Watchlist:
> XRT (SPDR S&P Retail ETF): Broad retail exposure, the sector that paid the largest share of these duties on imported goods.
> EXPD (Expeditors International of Washington, Inc.): A freight forwarder and customs broker, whose business sits directly on the filing process.
> UPS (United Parcel Service, Inc.): A large customs brokerage operation attached to a logistics network, with the same exposure from a different angle.

On October 8 the Court of International Trade certified a nationwide class of importers in a case called Freestyle World, Inc. v. United States, covering those who paid the challenged duties between February 2025 and February of this year. Class actions are rare in that court, which is part of why the decision drew attention.

The practical significance is about who was being left out. The court estimated that roughly $30 billion could remain with the Treasury without further action, and that the affected parties would mostly be smaller importers and businesses that never filed suit of their own. A company with a customs law firm on retainer had already sued. A company importing a few containers a year had not, and had no realistic path to the money.

Class certification removes the requirement to have filed individually. For now no action is required to be included, and the government may appeal both the underlying orders covering non-plaintiffs and the certification itself, so this is not finished.

The orders directing customs to reliquidate entries without the duties now appear in more than four thousand separate importer lawsuits, which gives some sense of how much of this has been fought case by case rather than resolved at once.

What it means for the numbers investors watch

There are two effects worth separating here, and they point in different directions.

For companies, a refund is a one off cash item, not an improvement in the business. A retailer that recovers duties it paid in 2025 books a gain that flatters a quarter and does not repeat. Reading that gain as operating improvement is the standard error with legal settlements, and the correction is to look at what margins did excluding it.

For the federal accounts, this is a straightforward fiscal cost. Tariff receipts that were counted as revenue are being paid back with interest, in a year when the deficit was already the reason the long end of the Treasury curve carries the term premium it does. A government refunding $126 billion has to finance that refund, and it finances it by issuing debt at a ten year yield above 5%.

Those two facts belong in different parts of a portfolio assessment, which is why the headline number on its own tells you very little.

Whitmore's Take: A refund is cash, not earnings, and the same event that flatters an importer's quarter adds to the financing the Treasury has to do. Worth reading both sides of it before treating the number as good news or bad.

Disclaimer
The content in this email does not constitute an offer or solicitation to buy or sell any financial instrument. All commentary is general in nature and is not directed at any individual investor.

Written by Daniel Whitmore
Millionaire Insiders