Somewhere in the Supreme Court's chambers, a decision is being finalized that could trigger the largest tariff refund in American history. At stake: more than $133.5 billion in duties collected under President Trump's emergency tariff orders, and the fundamental question of how much power a president has to reshape trade policy without congressional approval.

The case—V.O.S. Selections v. Trump—represents the most significant challenge to executive trade authority in decades. Lower courts have already ruled that Trump exceeded his powers by using the 1977 International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs. Now the Supreme Court must decide whether to affirm that judgment or give presidents expansive new tools to regulate international commerce.

What's at Stake

The numbers are staggering. U.S. Customs and Border Protection has reported that over $133.5 billion in IEEPA-related tariff collections are potentially exposed to refunds if the Supreme Court sides with importers. That's money that American companies paid on imports from China, Canada, Mexico, and dozens of other trading partners—costs that were largely passed on to consumers.

A ruling against the administration would mean:

  • Massive Refunds: Importers could reclaim billions in duties, though the logistics of processing such refunds would be unprecedented
  • Price Relief: Companies might pass savings to consumers, though this is not guaranteed
  • Legal Precedent: Future presidents would face significant constraints on using emergency powers for trade policy
  • Market Volatility: The ruling could trigger significant moves in currency, equity, and commodity markets

The Legal Battle

The case hinges on a single word: "regulate." IEEPA allows presidents to "regulate" international economic transactions during declared emergencies. The Trump administration argues this includes the authority to impose tariffs. Critics counter that when Congress wants to authorize tariffs, it says so explicitly—and IEEPA's language falls far short.

"The Federal Circuit concluded that when Congress intends to authorize tariff-setting, it typically does so explicitly. IEEPA's authority to 'regulate' imports does not amount to authority to impose tariffs."

— Federal Circuit ruling

During oral arguments in November, justices from both ideological camps asked skeptical questions. Some pressed the administration to provide examples where "regulate" has been interpreted to mean "tax." Others questioned whether IEEPA might authorize licensing regimes but not direct tariff imposition.

The Administration's Backup Plan

Treasury Secretary Scott Bessent has signaled that even if the Supreme Court rules against the administration, most tariffs will remain in place. He has identified at least three alternative statutory authorities under the 1962 Trade Act that could justify similar levies—though these would require new administrative proceedings and could be subject to their own legal challenges.

The alternatives include:

  • Section 201: Safeguard tariffs to protect domestic industries from import surges
  • Section 232: National security tariffs on specific products
  • Section 301: Retaliatory tariffs for unfair trade practices

Market Implications

For investors, the ruling creates a rare binary event with massive potential consequences. A decision upholding the tariffs would largely validate the status quo, though it would grant presidents sweeping new trade powers. A decision striking them down could:

  • Boost Retail Stocks: Companies that have absorbed tariff costs could see margin expansion
  • Pressure Domestic Manufacturers: Industries protected by tariffs could face renewed import competition
  • Move Currency Markets: The dollar could weaken if tariffs are removed, as trade deficits might widen
  • Create Commodity Volatility: Agricultural and industrial commodities could see significant price moves

The Waiting Game

The Supreme Court had been expected to rule last Friday, but the justices released just one opinion that day—unrelated to trade. Legal observers now expect the decision could come at any time during the court's January sitting, which runs through early February.

For importers who have paid billions in duties over the past year, the wait is agonizing. Many have filed protective refund claims with Customs, but the processing of any refunds would take months at minimum—assuming the legal battles don't continue further.

As markets closed Friday for the Martin Luther King Jr. weekend, the $133.5 billion question remained unanswered. When it comes, the ruling will reshape not just trade policy, but the very boundaries of presidential power in the American system.