In February 2026, the U.S. Supreme Court ruled that the tariffs implemented by an executive order in early 2025 under the International Emergency Economic Powers Act (IEEPA) were illegal. Shortly after, the U.S. Court of International Trade ordered the collected IEEPA tariff revenue to be reimbursed to the importers of record, who statutorily were responsible for paying the tariff duties. Kivanc Kirgiz, Arthur Corea-Smith, and Michael Schrammel coauthored the article “Economic Issues in IEEPA Tariff Duty Rebate Cases” to discuss the economic issues raised by the pass-through of cost shocks.
Key Takeaways
- The Supreme Court ruling that certain tariffs under the IEEPA were unlawful triggered “double recovery” claims against importers of record that have been receiving refunds of tariff duties from the government. Plaintiffs allege that businesses raised prices as a result of tariffs and are seeking a share of the rebates.
- The extent of tariff duty pass-through will likely emerge as a central issue within this new wave of litigation, raising complex economic questions regarding the appropriateness of a class wide approach and amount of refunds, if any.
- Empirically estimating the pass-through of IEEPA tariffs is challenging and depends on supply and demand conditions, market structure, changes in tariff policy, tariff avoidance, and macroeconomic factors. Further, the price paid by consumers depends on the pass-through rate at different levels of the distribution chain.
- Economists have developed tools to estimate pass-through of cost shocks across diverse contexts including tariffs, exchange rate movements, input cost increases, tax changes, and antitrust analysis. Pass-through is a highly product specific phenomenon with studies finding a wide range of pass-through rates.
This article was originally published by the ABA’s Business Law Today in August 2026.
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