The financial consequences of illegal Trump tariffs may extend far beyond the original duties collected from importers. As $175 billion in tariff revenue sits in the U.S. Treasury following a Supreme Court ruling that deemed the levies unlawful, the funds are accumulating interest that could significantly increase the eventual cost to taxpayers.
A new analysis from the Cato Institute estimates that the interest generated on these illegal Trump tariffs could reach roughly $700 million per month while the government works through the process of issuing refunds. Because federal rules require overpaid duties to be returned with interest, the longer the refunds take, the more the total liability grows.
Why interest is piling up on tariff refunds
Under federal regulations governing customs duties, importers who overpay tariffs must receive their money back with interest. U.S. Customs and Border Protection calculates this interest daily, applying annualized rates of about 4.5 percent for overpayments exceeding $10,000 and 6 percent for smaller sums.
With approximately $175 billion collected under the tariffs imposed last year through the International Emergency Economic Powers Act, the potential interest payments have become substantial.
Scott Lincicome, vice president of general economics at the Cato Institute and director of its Stiefel Trade Policy Center, said the accumulating interest effectively prolongs the economic impact of the policy.
“Consumers will be the biggest losers here, assuming refunds happen, because it’s not going to be a one-for-one,” Lincicome said. He added that American households could end up paying twice, first through higher prices caused by the tariffs and later through tax-funded interest payments on the refunds.
The Cato Institute calculates that $700 million in monthly interest equates to about $23 million per day. Spread across roughly 130 million U.S. households, the cost illustrates how delays in the refund process could translate into broader fiscal pressure.
Consumers already absorbed most of the tariff cost
Research released by the Federal Reserve Bank of New York suggests that American businesses and consumers bore the vast majority of the tariffs’ financial burden from the start.
According to the report, roughly 90 percent of the duties imposed under the International Emergency Economic Powers Act were passed through to domestic buyers in the form of higher prices. Importers typically transferred these costs down supply chains, affecting everything from manufacturing inputs to consumer goods.
Additional analysis from Yale University’s Budget Lab estimated that the tariffs increased annual household costs by between $1,300 and $1,700. Even with changes to the tariff regime following the court ruling, economists expect American households could still face around $800 in annual costs linked to the measures.
Because consumers paid much of the initial price increases, they may not receive direct refunds when importers eventually recover the tariff payments.
Why refunds could take more than a year
The Supreme Court ruling that invalidated the tariffs did not outline how the government should return the funds. As a result, the mechanics of issuing refunds will likely fall to U.S. Customs and Border Protection and the Court of International Trade.
Legal and administrative processes could take significant time. Analysts estimate refunds could take between 12 and 18 months to reach importers, though former President Donald Trump has suggested the issue could remain in litigation for years.
If the funds remain in the Treasury for an extended period, the interest liability could grow quickly. Cato Institute estimates suggest that the government could owe about $8 billion in interest after one year. By the end of a presidential term, the total could surpass $25 billion.
Tariff refunds are not unprecedented
While the scale of the refunds tied to the illegal Trump tariffs would be unusually large, the United States has handled similar processes before.
For more than five decades, the country has operated a program known as the Generalized System of Preferences, which reduces tariffs for certain developing countries. The program has lapsed multiple times when Congress failed to renew it on schedule.
During those gaps, importers paid full tariffs but later received refunds once lawmakers reinstated the program. Between 2021 and 2023 alone, about $3 billion in overpaid duties was returned to importers through this mechanism.
Dan Anthony, president of the economic research firm Trade Partnership Worldwide, said the logistics of issuing refunds are not necessarily complicated, even at large scales.
“The dollar value is pretty irrelevant,” Anthony said. “If you do a bank transfer, it doesn’t matter if the transfer is $5 or $500.”
However, complications could arise from private contracts between importers and their customers, which may determine how refunds are distributed throughout supply chains.
Anthony suggested that automating the government’s payment process could help accelerate the refunds and limit administrative delays.
Ultimately, the broader economic question may not be how refunds are processed but how much of the original tariff burden consumers will recover, if any.
