Following the Supreme Court’s tariff ruling a number of prominent Democrats including Illinois Gov. JB Pritzker are calling for refunds of the amount collected in the tariffs decreed by President Trump to consumers. I don’t think the Trump Administration should do so or the Supreme Court or Congress should determine that it should for three reasons.
The first reason is practical. There’s not actually any reliable way to calculate how much consumers paid in the now-known-to-be-illegal tariffs. Some of what some consumers paid in retail sales consisted of those tariffs. Some of the tariffs were paid by producers and not passed on to consumers. Some of the increases in prices were just that: increases in prices. Some of the tariffs were borne by importers and not passed on to retailers. If it could be determined what consumers purchased and if it could be determined how much of that was due to tariffs, then it might be doable. Simply refunding the amount collected by the federal government in tariffs might be politically attractive but it wouldn’t achieve the putative goal—refunding to consumers what they paid in tariffs.
The collected tariff revenue does not represent the economic burden borne by consumers. Refunding the collected amount would not match the distributed harm, because the harm was uneven, partially absorbed upstream, and partially embedded in price structures that no longer exist.
The second reason is justice. It wouldn’t be just to “refund” amounts to consumers that they didn’t actually pay. Critics seem to be conflating restitution to injured parties with disgorgement of unlawfully collected funds. They aren’t the same thing. Once the price system has adjusted, you cannot unwind it cleanly. Attempts to do so create new distortions.
The third reason is monetary. In a structurally deficit-financed federal system, large-scale refunds are overwhelmingly likely to be debt-financed. Debt-financed transfers increase aggregate demand without increasing output and therefore place upward pressure on prices.
You cannot unwind a tariff by writing checks after the price system has adjusted. You are not reversing a distortion; you are layering a new one on top of the existing structure. Consequently, my conclusion is that the amount shouldn’t be “refunded” at all. Although disgorgement of unlawfully collected government revenue is a well-established legal remedy and the government simply shouldn’t keep money it had no legal authority to collect, there is an alternative that would address the practical, moral, and monetary considerations identified above: use the money strictly to reduce the size of the deficit.
