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The U.S. Supreme Court’s decision striking down President Donald Trump’s “Liberation Day” tariffs has sent shockwaves through global trade — not only because of what it invalidated, but because of what comes next. Even as the Court ruled that the President lacked authority under IEEPA to impose sweeping tariffs, Mr. Trump proposed a fresh 10% across-the-board duty under Section 122 of the Trade Act of 1974, the very same day the judgement was delivered, which was further raised to 15% the next day – February 21.
Unlike the IEEPA tariffs, Section 122 authority is explicitly temporary. It allows the President to impose up to a 15% ad valorem tariff for 150 days, after which continuation would require Congressional approval. In the current political climate — with the President’s approval ratings under pressure ahead of mid-term elections — securing that approval may not be straightforward.
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The refund question
The fiscal stakes are enormous. As per Final Monthly Treasury Statement for Fiscal 25 (Oct. 1, 2024 – Sept. 30, 2025), the U.S. raised $195 billion in Customs duties, which was more than twice what the country raised the previous fiscal. A large share of that increase reflects the post-April 2, 2025 measures now invalidated.
This means tariff collections between April 2, 2025 and February 20, 2026 may be subject to protest and refund claims.
Under U.S. customs law, refunds are not automatic. They hinge on a technical concept: “liquidation of an entry.”
When goods enter the U.S., Customs initially assesses estimated duties. “Liquidation” is the formal administrative act by which Customs finalises the duty owed on that specific shipment. Once liquidated, the importer has 180 days to file a protest challenging the duty assessment. If Customs denies the protest, the importer may sue before the U.S. Court of International Trade.
Unliquidated entries can sometimes be corrected earlier through post-summary amendments. But once liquidation becomes final and the protest window expires, refund options narrow considerably.
The dissenting justices warned that invalidating the tariffs would create an administrative “mess.” They were referring to this cascading process of protests, litigation, and accounting adjustments that could possibly stretch over months, if not years.
Who benefits from this ruling?
A critical clarification: under U.S. law, only the “importer of record” — typically a U.S. company — may file the protest and receive the refund. Chinese exporters, for example, cannot directly file refund claims with U.S. Customs.
The answer for who benefits lies largely in contractual arrangements, not statutory entitlement.
In many supply contracts, the U.S. importer pays the tariff at the border. The exporter may agree to share or absorb some of the tariff burden through price adjustments. Some contracts include tariff-sharing clauses or retroactive price-adjustment mechanisms.
If a U.S. importer successfully recovers duties, whether the exporter benefits depends on:
- Whether the contract required the exporter to bear part of the tariff.
- Whether refund proceeds must be shared under contractual terms.
- Whether the importer voluntarily renegotiates pricing.
There is no automatic or formalised government-to-government mechanism that channels refunds back to foreign exporters. The distribution depends on private commercial arrangements.
In short, exporters could benefit indirectly — but only if contracts allow cost pass-through reversals. Otherwise, the refund remains with the U.S. importer.
Why China stands to gain most — On paper
China accounted for roughly one-third of U.S. tariff collections in CY2025, by far the highest nation paying duties to the U.S. Reports before the Senate Joint Economic Committee indicate importers of Chinese goods paid roughly $91.8 billion in Customs in CY25. Even before the reciprocal tariffs, importers of Chinese goods were one of the largest contributors to U.S. customs revenue.
If a significant share of post-April collections is refunded, the largest nominal relief would accrue to importers dealing in Chinese goods. Whether Chinese firms themselves see that money is a matter of private law.
The same logic applies to exporters from the European Union, India, Vietnam, Japan and the United Kingdom, all of whom faced higher effective duties in 2025. For context, automotive products, vehicle parts, electronics, apparel and textiles were among the top revenue-generating sectors in 2025. A reversal would materially reduce effective tax exposure for exporters from these economies. For instance, ‘Passenger cars, new and used’ constituted the largest duty receipts at roughly $25.5 billion in CY25. ‘Other parts and accessories of vehicles’ constituted another roughly $17.4 billion. And ‘Apparel/textiles (cotton, nonwool)’ constituted more than $13 billion in the same time-period, representing the top duty paying sectors. A reduction in tariffs in these sectors will have a direct and material impact on Indian exporters.
Trade deals and leverage
The ruling also introduces uncertainty around executive-driven trade arrangements concluded with the EU, U.K., Japan, and Vietnam and ongoing with India among others. While the agreements themselves remain intact, the Court has clarified that sweeping tariff authority requires explicit Congressional sanction.
That shifts the bargaining landscape. Countries yet to finalise deals may now negotiate with greater confidence that dramatic tariff threats face higher judicial scrutiny.
The Section 122 gamble
The proposed 15% tariff under Section 122 offers the administration a narrower but legally clearer pathway. However, it is capped at 150 days. Its continuation requires Congressional approval, cannot exceed 15% and is intended to address balance-of-payments concerns, not broad geopolitical leverage.
With mid-term elections approaching, Congressional appetite for extending a universal tariff — especially amid inflation sensitivities — may be limited. A divided Congress could block continuation, undermining the durability of the measure.
Institutional reverberations
Internationally, the ruling sends two contrasting signals.
On one hand, it reinforces confidence in American constitutional checks and balances. On the other, it may weaken the perceived credibility of presidential tariff threats.
For global markets, uncertainty — over refunds, over Section 122’s lifespan, and over future Congressional action — may prove as economically consequential as the tariffs themselves.
The economic consequences of the rulling by the Supreme Court of the United States in this case, are only beginning to unfold.
Published – February 22, 2026 12:22 am IST
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The global economic consequences of the SCOTUS ruling invalidating Trump tariffs
