‘That would be great’: US companies look to recover $1 trillion in tariffs – and a long battle ahead – depending on Supreme Court

After the imposition of tariffs during the first administration of President Donald Trump, Lovesac CEO Shawn Nelson It made the decision to move some of its industries from the mainland to Vietnam, Indonesia and Malaysia. After a set of tariffs to kick off Trump’s second term, Nelson not only felt validated in his decision to diversify the supply chain; He doubled down on the idea, moving more production to the United States

Nelson said: “We have the intention to manufacture our basic products in America by the middle of next year, and for the bulk of our production to be in America by the end of the next fiscal year.” luck. “If this is really what Trump wanted, then I think it worked for us.”

Nelson’s guess may be right about the president’s insistence on tariffs seven years into his first term, but the taxes may not be around for much longer. Next month, the Supreme Court will decide Start hearing the arguments On the legality of fees imposed under the International Economic Powers Act in emergency situations. If the court upholds lower court rulings that the tariffs are illegal, tens of billions in tariff revenue could be returned to American companies. Treasurer Scott Besent said those refunds may also be forthcoming Between $750 billion and $1 trillion.

Even for Lovesac, with its local supply chain push, the cash back has appeal. The tariffs have impacted the company’s gross margins, it recently reported Earnings report. Lovesac raised its price twice in the past year.

“I mean I would accept it,” Nelson said of potential refunds. “For us, it’s worth tens of millions of dollars. So that would be great.”

But the reality of pursuing these refunds — even if the Supreme Court rules against the tariffs — is confusing, and further complicates whether it’s even worth putting in the effort to recoup the lost money. For some companies, this effort may be worth it. For others, it may still be worth it, but it will also be a total pain.

“The general feeling is that if you have the resources and the capacity, juice is worth it,” said David Warrick, Overhaul’s executive vice president of supply chain risk management. luck. “If you’re a small business or a smaller importer, and you’ve already spent time taking on the costs of tariffs and the risks associated with your supply chain, you have to weigh that cost and benefit.”

Complexities of tracking refunds

Requiring companies to even consider the possibility of refunds is difficult, given the lack of information about what the refund process would look like, even with the Supreme Court hearing the case over the tariffs within weeks.

They have lawyers He speculated that it was in order For companies to get the tariffs, they may have to go through an application process with the U.S. Consumer and Border Protection Board (CBP) — which routinely issues checks to companies that overpay for tariffs — or each company may have to file its own lawsuit. The government is unlikely to provide automatic refunds.

“We’re not even sure how (CBP) is actually going to be able to manage these tariffs,” Warrick said.

Henrybuilt, a maker of luxury homes with a mostly local supply chain, is one of the companies ignoring the idea of ​​refunds, even as it continues to source materials from tariff-hit Austria.

“This would make perfect sense if it were a large number,” CEO Scott Hudson said. “I doubt it would be a big number for us, so maybe it’s not worth chasing.”

The housing and furniture industries are most concerned about the lasting impact the tariffs will have on the cost of building homes, Hudson said. on 7% of the goods In new home construction, $14 billion worth, came from foreign countries, according to the National Association of Home Builders.

However, there is still precedent for companies taking advantage of tariff drawbacks. US Trade Representative (USTR) Announced in March 2022 It will reinstate hundreds of exclusions for products that were subject to Section 301 definitions, which have expired at that time. The estimated value of the refund was About 1 billion dollarsa small fraction of the current potential recovery.

Above all, Warrick said, timing remains the biggest variable in determining when and how companies can begin the refund process.

He added: “No one knows how long this process will take.” “Regardless of the initial outcome, rest assured, it will be appealed from both sides. So I don’t think we will see a short-term outcome on this.”

What makes refunds worth it?

While the refund process remains murky, that hasn’t stopped some refinancing companies from entering the fold, seeing an opportunity to make money from companies that don’t want to deal with the hassle of the refund process, Warrick said. Liquidation specialists anticipate that refunds will occur and purchase the rights to them, offering companies about 20% of the total tariffs paid in exchange for the rights to any future refunds.

“Scalpers step in and say, ‘Why do you want to handle all of this yourself?’ Warrick said. “And if you are an SME that has already experienced the pain of having to pay tariffs and do not want to change your operations, this may seem like a very attractive proposition.”

At this point, after more than six months of volatile tariff policies, the issue of the legality of tariffs is irrelevant for some companies. For Lovesac, the overhaul of its supply chain over the past decade represented growing pains, but the tariffs were actually an opportunity to develop American manufacturing, a goal CEO Nelson had been pursuing since the company’s inception. It basically doesn’t matter to some companies if the clawback is a black box — or a complete fantasy — because they have made long-term adjustments to their businesses to account for export taxes, whether they see those changes as a sunk cost or as protection for the future.

“Even if there was a recovery, and then you eliminated the tariffs — eliminated all the tariffs — it wouldn’t change my view on what we would do,” Nelson said.

“I would love that,” he concluded. “But I don’t expect that.”