On April 2, 2025, so-called “Liberation Day”, President Trump invoked the International Emergency Economic Powers Act (IEEPA) and put high tariffs on US imports. His base tariff was 10%, but most countries faced higher rates, including 20% for the European Union, and over 40% for Cambodia and Vietnam.
Trump has claimed repeatedly that he loves tariffs. Two things can explain this. They let him act like a tough guy, inflicting economic pain on other nations, including long-time US allies. Also, tariffs let Trump grift by reducing rates in exchange for gifts and praise from abroad (See Washington Spectator, “Tariff Man Fumbles and Bumbles on Trade”).
Trump’s tariffs generated between $150 billion and $200 billion in tax revenue between Liberation Day and February 20, 2026, when the Supreme Court declared the tariffs illegal because IEEPA gave the President no authority to impose them. Moreover, as many economists pointed out, the President continually bragged about how great the US economy was doing, contradicting his claim that an economic emergency demanded high tariffs.
Most Americans don’t know that tariffs are taxes imposed on foreign goods when they enter the U.S. These taxes are paid by US importers upon taking possession of goods coming into the country, just as sales taxes are paid by customers buying goods at stores or online.
Many firms, including Costo and Goodyear, have already sued the US government to get back the illegal tariffs that they paid. Firms contend they should receive rebates since they were the ones that paid the tax.
This claim hides an important detail. Taxes are like the potato in the children’s game hot potato. No one wants to pay a tax; everyone tries to pass it on to someone else. Firms initially paid the tariffs. Then they raised prices by the amount of the tax (or more), passing their additional cost to consumers, who were stuck paying higher prices when the music stopped.
It seems unfair to reward firms by giving them money for pushing Trump’s illegal tariffs on to consumers. Consumers were robbed once. Refunding their money, by giving public funds to businesses, adds insult to injury. If Republicans cared about ordinary citizens, they would champion the average Americans who paid the tariffs and demand that consumers get their money back.
Perhaps Republicans are trying to figure out how to do this. I doubt it, as Republicans have demonstrated repeatedly that their main concern is making the wealthy even richer. There is no other explanation for the so-called Big Beautiful Bill they passed in 2025 (see Washington Spectator, “One Big Bad Bill”). Tariff rebates that enable firms to pay higher dividends, or buy back outstanding stock shares, would put even more money into the pockets of the very rich. It would not help most Americans. Over half the country owns no stock; and stock holdings are rather meager except for the wealthiest 4%-5% of the nation.
If Republicans did care about ordinary citizens, it would be a simple matter to refund Trump’s illegal tariffs to the people who actually paid them. This solution has two parts.
First, impose a 100% excess profits tax on any tax rebate received by a firm as a result of paying Trump’s Liberation Day tariffs. Excess profit taxes keep firms from opportunistically gaining during a crisis, such as wartime. The US imposed such a tax during both World Wars and the Korean War because profits came from selling goods to the government to fight the war and from shortages of goods due to the war effort, rather than from firms making sound business decisions.
A tariff rebate to firms in the wake of the February Supreme Court ruling is the textbook definition of excess profits. Firms gained when they increased prices due to the tariff. This was part of their profits. Refunding the illegal taxes they paid will simply increase their profits by the amount of the rebate. Surely, firms have done nothing to deserve this. The payment would not be for anticipating consumer demand, making a better product, or for some great innovation. It would only reward firms that already passed Trump’s tariffs on to consumers.
To prevent firms from gaining a second time merely requires taxing tariff rebates at a 100% rate. Firms will have the option to drop their lawsuits, get no money, and pay no extra taxes. Or they can continue their lawsuits and repay any rebate that they receive to the Federal government. Either way firms gain nothing. In addition to saving the government money, this will unburden the courts from having to hear numerous tariff rebate cases.
Second, money must be sent to households, or the people who ultimately paid the illegal tariffs.
Americans filed approximately 150 million tax returns in 2025. During COVID, the government sent out checks to US households. The Cares Act of 2020 paid $1,200 to each adult and $600 to each child. The 2021 American Rescue Act paid up to $1,400 per individual (depending on their income). Trump’s illegal tariffs can be refunded to consumers similarly—with checks of around $1,200 sent to every US household.
Right after February’s Supreme Court ruling, Trump tried again. He imposed a 10% tax on all imports citing Section 122 of the Trade Act of 1974, which says the President can put a tariff of up 15% on all imported goods. One problem for Trump is that his tariff authority lasts only 150 days. Another problem is that the tariff must be the same on all imported goods. The President cannot reward countries bowing down to him by removing the tariff. If he does this for one nation, he must do it for all nations.
The US Court of International Trade ruled on May 7th that the Section 122 tariff was illegal because there was no evidence the US had a balance of payments crisis that necessitated a tariff. The administration is appealing but has a weak case. Balance of payments crises existed when the gold standard reigned and gold was the world’s money. The problem was that when a nation ran a trade deficit, gold would go abroad. With a large deficit for many years countries could run out of gold, or money, making it impossible to borrow and leading to a large economic slump. Having abandoned the gold standard, and with the US dollar serving as the world’s money, such a crisis is no longer possible.
When the Supreme Court decides this case, more tariff rebates will likely be needed. Again, rebates to firms should be taxed at 100% and the illegal tariff money should be refunded to all households.
Section 122 tariffs expire on July 24th. Knowing this was coming, on June 3rd the President presented yet another justification for tariffs—Section 301. This part of the 1974 Trade Act lets the President impose tariffs on nations engaging in unfair trade practices. It was designed to let the US punish nations employing slave labor, thereby giving them an unfair trading advantage. President Trump has said that he intends to use Section 301 to put 10%-15% tariffs on Australia, Britain, Canada, and the European Union. There is no evidence that any of these countries use slave labor extensively.
Section 301 tariffs will likely be declared illegal by US courts at some point. Again, the government will need to refund the taxes collected by firms that then passed them along, like a hot potato, to consumers. And again, an excess profits tax along with a rebate check sent to all households is the only reasonable solution to the problems created by Trump’s tariffs. The President should not be allowed to use illegal tariffs to reward wealthy shareholders while raising the cost of living for average families.
Democrats in Congress should all support such an approach. With mid-term elections approaching, Republicans would be smart to support this as well.
Steven Pressman is part-time professor of economics at the New School for Social Research, professor emeritus of economics and finance at Monmouth University, and author of Fifty Major Economists (Routledge, 2013).
