In a monumental legal and financial showdown, wholesale giant Costco has emerged as a leading plaintiff in a wave of litigation against the U.S. government, seeking billions of dollars in refunds for tariffs that the Supreme Court recently declared illegal. The high court’s 6-3 decision on February 20, 2026, delivered a stinging rebuke to former President Donald Trump’s use of executive power, ruling that he overstepped his authority by imposing sweeping global tariffs under the International Emergency Economic Powers Act (IEEPA) .
While the ruling was a clear victory for the separation of powers, it opened a complex and contentious new chapter: how to return the staggering sum of money—estimated to be between $130 billion and $175 billion—already collected from American businesses .
The Costco Lawsuit: A “Necessary” Precaution
Costco Wholesale filed its lawsuit at the U.S. Court of International Trade in December 2025, joining the ranks of hundreds of other companies, including Revlon, Goodyear Tires, and Kawasaki, that sought to protect their right to a refund . The retail giant’s legal action was a strategic move driven by a specific fear: that a Supreme Court victory would be hollow without a formal court order guaranteeing their money back.
In its 17-page filing, Costco argued that litigation was “necessary… because even if the IEEPA duties and underlying executive orders are held unlawful by the Supreme Court, importers that have paid IEEPA duties, including Plaintiffs, are not guaranteed a refund for those unlawfully collected tariffs” . The company was racing against the clock, aiming to secure its claims before the administrative process of “liquidation”—the finalization of tariff payments—began in mid-December 2025 .
The government had previously assured the courts in filings that refunds would be issued if the Supreme Court ruled against the tariffs. In a stipulation filed as early as May 2025, the Justice Department stated it “will not oppose” refunding tariffs found to be collected unlawfully after a final decision . However, companies like Costco remained skeptical, seeking the certainty of a judicial safety net.
The Supreme Court Ruling: A Question of Authority
The legal battle centered on Trump’s use of IEEPA, a 1977 law designed to address national emergencies by regulating financial transactions. The administration had invoked it to justify tariffs on allies and adversaries alike, citing threats like the opioid crisis and trade deficits .
Chief Justice John Roberts, writing for the majority, dismantled this argument, holding that the power to “regulate… importation” did not implicitly grant the President the power to impose taxes or tariffs. The court found that such a far-reaching economic action—described by the plurality as a “transformative expansion” of executive power—required clear authorization from Congress, which IEEPA did not provide .
While the decision voided the tariffs moving forward, it remained conspicuously silent on the fate of the funds already collected. This silence effectively tossed the “hot potato” back to the U.S. Court of International Trade to determine the scope and mechanism of refunds .
The Staggering Price Tag and Logistical Nightmare
The financial implications of the ruling are immense. Data from U.S. Customs and Border Protection from December 2025 showed that approximately $130 billion had been collected under the IEEPA tariffs. However, the University of Pennsylvania estimates that the total has since ballooned to more than $175 billion, as tariffs continued to be paid while the Supreme Court deliberated . The Committee for a Responsible Federal Budget estimated that roughly $90 billion of the nearly $200 billion collected in the first year alone might be eligible for refunds .
Processing these refunds presents a logistical quagmire. Treasury Secretary Scott Bessent acknowledged the complexity, stating in January that while the administration has adequate funds—with nearly $774 billion in cash on hand at the time—repayments would be spread out over a significant period. “Probably over weeks, months, may take over a year, right?” Bessent told Reuters .
Following the Supreme Court’s decision, the tone shifted. Bessent suggested the process could drag on for years, noting that because the Supreme Court gave no specific instructions, the revenues are now “in dispute” and subject to prolonged litigation . Experts note that the process will likely require each importing entity to file detailed administrative claims with Customs and Border Protection or pursue individual suits, a complex legal journey that may be feasible only for large corporations with significant resources .
Impact on the Trump Administration: A “Boondoggle” or Broken Promise?
The refund process poses a significant political and financial headache for the Trump administration. During his campaign and time in office, Trump championed tariffs as a tool to enrich the U.S. Treasury and fund tax cuts or even direct payments to Americans. He had previously floated the idea of a “tariff dividend” check of at least $2,000 per person . The prospect of having to return hundreds of billions of dollars, rather than spending them, undermines a key pillar of his economic platform.
Trump himself railed against the potential refunds on social media in January, warning they could total hundreds of billions of dollars and would be “a complete mess, and almost impossible for our Country to pay” . This rhetoric shifted to defiance post-ruling, with Trump predicting the refunds would be “locked up in litigation for years” .
The administration and its allies have also sought to frame the refunds as a windfall for corporations rather than relief for consumers. Treasury Secretary Bessent labeled the potential payouts a “corporate boondoggle,” questioning, “Costco, who’s suing the U.S. government, are they going to give the money back to their clients?” . This argument taps into a deeper economic question: if companies passed the cost of the tariffs onto consumers, should they be the ones to receive the refunds? Economists point out that the legal refunds will go to the importers of record, not the end consumers who paid higher prices .
The “Plan B”: Bypassing the Supreme Court
In an immediate response to the ruling, the Trump administration demonstrated its determination to continue its protectionist trade agenda. Hours after the Supreme Court decision, Trump signed a proclamation imposing a new 10% global tariff on almost all imports, this time using a different legal basis: Section 122 of the Trade Act of 1974 .
This law allows the president to impose tariffs of up to 15% to address “international payments problems,” but it comes with a significant catch: the tariffs are temporary, expiring after 150 days unless Congress votes to extend them . The administration signaled that this is a stopgap measure while it initiates longer-term investigations under Section 301 (unfair trade practices) and Section 232 (national security) to impose more permanent duties .
By pivoting to these alternative statutes, the administration aims to maintain the revenue stream and political momentum of its tariff policies, effectively trying to make the Supreme Court’s refund order a moot point by taxing imports under new, supposedly legal, authority.
Conclusion
The Costco-led litigation represents one of the largest mass actions for refunds of federal taxes in U.S. history. While the Supreme Court has affirmed that the tariffs were illegal, the fight over the $175 billion is just beginning. As the U.S. Court of International Trade gears up to navigate the murky waters of refund distribution, thousands of businesses are waiting to see if they will recoup costs, while the administration grapples with the political fallout of returning money it had already spent. For now, the Trump administration has shifted to a “Plan B” tariff strategy, ensuring that while this battle may be lost, its trade war is far from over.