Businesses can apply for customs duty refunds. Will consumers see it?
Companies are not required to share tariff refunds with customers, but some have said they plan to pass on some relief.
In another setback to President Donald Trump’s trade policies, a federal court has ruled against the president’s 10% tariffs, replacing those struck down by the Supreme Court. But consumer prices remain unlikely to fall as the Iran war continues and the administration looks for other ways to impose tariffs.
The Court of International Trade ruled 2-1 on May 7 that President Trump’s decision in February to use Section 122 of the Trade Act of 1974 to impose 10% tariffs was illegal. A two-judge majority barred the administration from collecting those duties from Washington state and two companies that also sued over the policy, but the duties would remain in place for most importers until the appeals process is completed.
U.S. Trade Representative Jamison Greer confirmed on May 8 that the administration plans to appeal the ruling, and is hopeful that that is a possibility.
“President Trump is focused on imposing tariffs to protect the economy,” Greer said on Fox Business Network’s “Morning with Maria.” “Obviously we will act according to the law and in accordance with the direction of the court, but his policy has not changed.”
Brian Bethune, an economics professor at Boston University, believes this lawsuit is highly likely.
“They tried that with the IEEPA tariffs and it didn’t work,” Bethune said, referring to previous tariffs implemented under the International Emergency Economic Powers Act. “Long live Mary is highly unlikely in this case as the conditions of Article 122 do not apply at all.”
Why won’t tariffs end?
In any case, the administration still has several tools to implement the tariffs that are the cornerstone of President Trump’s economic policy. One method involves utilizing Section 301 of the same 1974 law. The section requires investigations but allows the administration to impose tariffs in response to actions by foreign governments that burden or restrict U.S. commerce. Mr. Greer previously announced Section 301 investigations into multiple countries and the European Union.
When the appeals process and investigation are resolved, it’s unclear whether the effective tariff rates will be the same, lower, higher or the same as last year, when President Trump used the International Emergency Economic Powers Act to impose tariffs on nearly all U.S. trading partners. The Supreme Court ruled in February that these tariffs were illegal.
If the Section 301 review goes as the administration intends, the effective tariff rate at the end of this year should be close to, and perhaps higher than, the level at the end of 2025, said Drew DeLong, director of corporate policy at Kearney Foresight, the global management consulting firm’s in-house think team.
Why a court ruling against tariffs doesn’t mean lower prices
In a victory for importers who paid IEEPA duties, court-ordered refunds based on judgments that invalidated previous duties will begin this month. Still, just because importers receive refunds doesn’t guarantee prices will go down.
“Time will tell, but I think companies will be wary of the ever-changing tariff landscape and proceed with caution as a result,” Matthew Seligman, an attorney and founder of Greyhawk Law, told USA TODAY.
John Groton, Thrivent’s head of energy, materials and utilities, said there was “no question” that tariffs were causing higher inflation than they currently are, but they were not the only thing driving up prices.
While the oil crisis stemming from the Iran war is already hurting gas pumps for American drivers, Groton said disruptions to supply chains for fertilizers, metals and cargo risk driving up prices for food, housing and other consumer goods the longer the conflict drags on.
“Gasoline is getting a lot of attention. It (the price increase) is going to happen quickly. Unless you own an EV or buy gas once a week, it’s very visible,” Groton said. “Most other areas take longer to bleed.”
Meanwhile, preliminary results from a consumer survey released by the University of Michigan on May 8 revealed that the consumer sentiment scale had fallen to 48.2, an all-time low.
“About a third of consumers spontaneously mentioned gas prices, and about 30% mentioned tariffs,” said Joan Hsu, director of consumer research. “Overall, consumers continue to experience cost pressure from rising prices.”
Analysts expect inflation to rise again in April. Whether these predictions are correct will be revealed in the Department of Labor’s Consumer Price Index report, which will be released on May 12th.
Contact Rachel Barber rbarber@usatoday.comFollow her on X @rachelbarber_and subscribe to her newsletter Making More of Your Money here.
