DALLAS — Treasury Secretary Scott Bessent signaled a grim outlook for American businesses and consumers expecting a windfall from the Supreme Court’s recent invalidation of global tariffs. Speaking at the Economic Club of Dallas on Wednesday, Bessent warned that $175 billion in duties collected under the International Emergency Economic Powers Act (IEEPA) may be “lost to the American people for good” as the administration prepares for years of litigation.
The funding crisis follows a landmark 6-3 ruling on February 20, 2025, in Learning Resources, Inc. v. Trump, where the Supreme Court held that the White House lacked the constitutional authority to use IEEPA to levy broad, revenue-raising duties. While the ruling immediately halted the collection of these “emergency” tariffs, it provided no roadmap for how—or if—the government must return the billions already paid by U.S. importers.
A Pivot to ‘Section 122’
In the wake of the judicial rebuke, the White House has scrambled to maintain its trade agenda. On February 24, the administration pivoted to Section 122 of the Trade Act of 1974, implementing a temporary 10% global tariff—which President Trump has already signaled could rise to 15%.
“The policy hasn’t changed. The legal tools that implement it may change,” U.S. Trade Representative Jamieson Greer told Fox News Sunday. However, these new measures do little to address the $175 billion “black hole” currently sitting in Treasury accounts.
The $175 Billion Refund Dispute
According to the Penn Wharton Budget Model, IEEPA collections reached approximately $164.7 billion by January 2026, with daily receipts of $500 million pushing the total toward $175 billion by the time of the ruling.
Economists initially viewed potential refunds as a massive fiscal stimulus. However, the Treasury Department appears set to fight any rapid disbursement:
- Extended Litigation: Bessent indicated that the refund process could be “dragged out for weeks, months, years” in international trade courts.
- No Automatic Payback: Despite previous assurances that the administration would respect court rulings, officials now suggest the Supreme Court’s silence on “equitable restitution” means the government is not obligated to act without further specific orders.
- Corporate Retention: Even if checks are cut to importers, UBS Chief Economist Paul Donovan warned that consumers are unlikely to see lower prices, as businesses will likely use the cash to offset the incoming Section 122 duties.
Impact on the ‘Effective Rate’
The legal upheaval has created a volatile environment for the American economy. The Yale Budget Lab reports that the removal of IEEPA duties briefly dropped the average effective tariff rate from 16.9% to 9.1%. However, if the proposed 15% Section 122 replacement is fully implemented, that rate is expected to climb back to approximately 13.7%.
| Authority | Status | Effective Tariff Rate Impact |
|---|---|---|
| IEEPA | Struck Down (SCOTUS) | Was ~16.9% |
| No Tariffs | Hypothetical | ~4.4% |
| Section 122 | Active (150-day cap) | ~9.1% to 13.7% |
The Road Ahead
The battle now moves to the U.S. Court of International Trade. Logistics giant FedEx has already filed suit seeking a full refund, a move expected to be mirrored by thousands of smaller importers.
While the administration insists that revenue projections for 2026 remain unchanged due to the Section 122 pivot, the $175 billion question remains the largest looming fiscal uncertainty for the Trump administration’s second year. For now, the Treasury’s message to the American public is clear: don’t wait for a check.
