Donald Trump is facing lawsuits from retailers, demanding tariff paybacks. (Photo: Renaik)
Costco has filed suit against the Trump administration to collect tariffs that it’s been paying, if the Supreme Court holds that Trump‘s imposition and collection of tariffs is illegal.
Bumblebee Foods, EssilorLuxottica Eyewear, Kawasaki Motors, Revlon and Yokohama Tires have also filed similar refund suits.
No doubt others have and will.
Legal observers believe that the justices will rule that Trump was not authorized to impose and collect tariffs. Trump is already whining about the adverse effect on the country if he loses.
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If the tariffs are struck down Costco will be entitled to refund.
The suit was filed in the International Court of Trade, the first court that held Trump‘s imposition of tariffs under the International Emergency Economic Powers act to be illegal.
The government appealed that decision and lost the appeal. Now the Supreme Court has the case.
Costco said that it filed suit because, in essence, it could not rely on the government to voluntarily return tariffs paid, and believed it needed to file a refund suit.
Costco left to a later time the calculation of the amount of the refund it would be owed, ostensibly because it is still paying tariffs on imported goods.
Trump promised to slash the deficit through a combination of tariffs imposed on imported foreign goods — essentially a tax on consumers — and by economic growth.
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He had to do something because he was adding substantially to the deficit by the tax cuts he had given to wealthy taxpayers.
The US economy is not growing at the predicted rate, primarily due to the international trade war he started.
US debt is enormous. In 2024 it stood at 124% of gross domestic production.
Trump‘s big beautiful bill is projected to add $3 trillion to the $38 trillion national debt over the next decade or $5 trillion including interest on the debt.
Federal Reserve chair Jay Powell has said that while the debt may be sustainable, the pathway is not. In other words, the country may be able to deal with the debt as it exists, but additional debt can be extremely dangerous.
In September, Bruegel economists and professors wrote that the US “should start fiscal adjustment as soon as it can if it wants to head off the risk of exploding debt related to Trump’s tax and spending plan.”
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Their report concluded that Trump’s tax bill “presents a clear danger to long-term US debt sustainability….”
They added there are steps that must be taken immediately to bring debt back to a sustainable trajectory, and they mentioned lower interest rates as one such step.
However, the independent Federal Reserve has control of interest rates, not the government.
The problem is that Trump has added to the deficit considerably and intended that his tariffs would help reduce that deficit and pay for the tax benefits that his tax law granted to wealthy taxpayers.
As well, he has been fuming over the Fed’s failure to reduce interest rates to the level he thinks is appropriate to affect the deficit.
But now it appears the Supreme Court will deal him and the economy a striking blow over his tariff plan.
Already, large companies are lining up to collect refunds of tariffs they have paid. Trump claims he has collected trillions, although that’s unlikely to be true.
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If that happens, it will be devastating to Trump’s fiscal plan – something he and his advisors should have known could happen.
It may even be that the government will be unable to afford to pay these refunds or will have to go to the debt market and increase the deficit substantially paying a high rate of interest on the money owed.
Add to that problem that interest rates have not dropped to levels Trump demanded, and Trump‘s tariff war has served to decrease United States growth rates.
All of this brews up the strong possibility of severe economic consequences; a debt crisis caused by rash and unlawful actions on the part of those in charge.
We haven’t been there before, so its no easy feat to predict the consequences, although they can’t be good.