The magnitude of tariff refunds the Trump administration must dole out is now outpacing how much money it’s bringing in through the import taxes, and it’s dealing a new blow of damage to the U.S. economy, one think tank warned.
In May, when the U.S. Customs and Border Protection (CBP) rolled out its online tariff refund portal, the U.S. Treasury refunded $21.97 billion, exceeding the $21.93 billion it collected that month—and a complete reversal of the month before, when the Treasury distributed only about $2 billion in tariff refunds, according to a report published this month by the Tax Foundation, a tax policy nonprofit, citing monthly Treasury statements. In June, the balance sheet became even more lopsided, with $49.18 billion refunded as compared to the $23.63 billion collected, resulting in a net customs revenue of negative $25.56 billion.
Tariff revenue makes up just a small fraction of the government’s total revenue, but the Tax Foundation warned the chaos surrounding the tariffs and their legal fallout has had an outsized economic impact, exemplified by the government hemorrhaging billions of dollars monthly through refunds.
“While importers will experience some relief by receiving refunds, the economic damage from the chaotic tariff regime cannot be refunded—and the remaining tariffs means economic damage will continue to grow,” the report said.
The economic fallout of Trump’s tariffs
After collecting $166 billion in revenue from tariffs imposed under the International Emergency Economic Powers Act (IEEPA), the Supreme Court struck down the levies in February, resulting in a mandate forcing the Trump administration to redistribute the income to up to the 330,000 eligible importers who footed the bill for the levies. While President Donald Trump has tried to rebuild his tariff policy in the aggregate—imposing duties under Sections 122, 232, and 301 of the 1974 Trade Act—he has not been able to recoup the money lost through refunds.
The continued drain on tariff revenues represents a failure of the Trump administration to deliver on its lofty promises of using the income to reduce the federal deficit and offset tax cuts from the One Big Beautiful Bill act, argued Erica York, vice president of federal tax policy at the Tax Foundation.
“The president himself and the administration have been talking so much about how they’re going to raise a lot of revenue with tariffs, how they’re going to supposedly fix the fiscal situation with tariffs,” York told Fortune. “And that really mismatches what we’re seeing play out in the data, which is that they have relied on really shaky legal grounds to try to impose these tariffs.”
Meanwhile, tariffs have increased inflation, with the Federal Reserve Bank of St. Louis finding the levies hiked the prices of pharmaceuticals and household utensils by more than 4% over the last year.
That’s on top of the uncertainty accompanying Trump’s whipsaw tariff policy, which York said has been as disruptive as the levies themselves, leaving companies scrambling to adapt supply chains, as well as holding off on hiring or increasing wages as they navigate new variables. She noted tariff policy has changed more than 50 times since Trump took office again in January 2025, most recently this week, with Trump announcing a three-day pause on a proposed 50% tax on Canadian imports as the countries negotiate a trade deal.
“It hasn’t just been, ‘Here’s a new tariff done in a very transparent way,’ and then businesses can plan around it,” York said. “It has been a chaotic environment.”
The hitch with tariff refunds
To be sure, the Trump administration won’t have to distribute tariff refunds forever. The Treasury Department has already given out $100 billion in refunds since May, crossing the halfway point of total revenue collected through IEEPA tariffs. But the Tax Foundation suggested the remaining $66 billion will be harder to distribute, as the next phase of refunds deal with more complex claims filed after the established liquidation period, raising procedural questions.
At the same time, refunds yet to be disbursed are accruing interest, up to 4.5% on overpayments on $10,000 or more and 6% on overpayments less than that, according to the Cato Institute, meaning taxpayers are still footing the bill on refunds yet to be returned to them.
York expects tariff revenues to rise back into the positive in a matter of months, but warned the uncertainty surrounding the existing levies remain, with companies suing the administration to remove Section 301 tariffs.
“Even though we’re past the IEEPA saga, we’re not past the chaotic tariff environment saga,” York said. “I think we are stuck in that for at least the next couple of years.”
This story was originally featured on Fortune.com
