Aftermath of Trump's Tariff Storm: Soaring Federal Deficit, Supply Chain Restructuring, Can Global Trade Rules Go Back?

Former U.S. President Donald Trump's 'reciprocal tariffs,' introduced last year, were declared illegal by the U.S. Supreme Court on February 20 this year in a 6-to-3 ruling. This decision imposed significant limits on presidential authority to impose tariffs. However, even as the U.S. government refunds billions in tariff payments, Australian scholars argue that this does not mark the end of Trump’s tariff policy, which continues to generate global uncertainty.

Is the damage irreversible?

Markus Wagner, Director of the Transnational Law and Policy Centre at the University of Wollongong in Australia, recently wrote in The Conversation, an Australian platform for intellectual discourse, that of the approximately $166 billion in tariffs the U.S. government must refund, over $85 billion has already been returned to companies. Yet, even though the Supreme Court's February ruling overturned the tariffs, many economic and political losses—and some achievements of the Trump administration—may be impossible to reverse.

Wagner notes that these refund payments caused the U.S. federal deficit in June this year to reach $120 billion, a stark contrast to the $27 billion surplus recorded in June 2025. In other words, the $166 billion was not a penalty, but largely unauthorized collections by the government that must now be repaid.

He also explains that the refund process involves complex technical procedures and is distributed across many importers, making it far less visible than the initial tariff announcements. Moreover, concessions made by U.S. trade partners like the UK and EU under the threat of high Trump-era tariffs will not automatically disappear once the tariffs are overturned.

For businesses, being repaid for payments they should never have made does not restore them to their pre-tariff state. 'With rising financing costs, importers’ capital was tied up for months, orders were canceled, and inventory piled up. Many importers had to renegotiate contracts,' Wagner said.

On February 20, 2026, immediately after the U.S. Supreme Court ruled that the president’s unilateral tariffs under the International Emergency Economic Powers Act were unconstitutional, Trump held a press conference criticizing opposing justices and emphasizing his intent to find alternative legal grounds for taxation. (AP)

Did small businesses suffer the most?

Wagner points out that companies incurred costs for customs brokers and lawyers and delayed other investments while awaiting clarity on applicable tariffs. Some simply stopped exporting to the U.S. due to uncertainty over tariff rates. Small businesses were particularly hard hit: 'They typically have less cash reserves and fewer alternative suppliers, making them more vulnerable to unexpected tariff hikes.'

One analysis estimates that small business importers in the U.S. paid an average of $306,000 in additional tariffs. According to the Federal Reserve Bank of Atlanta, financially strained firms will receive 34% of all refunds—about $56 billion. These businesses are most likely to use the funds for investment, hiring, or lowering prices.

Meanwhile, financially stronger companies are more likely to use refunds for savings, debt repayment, or shareholder distributions. For example, PepsiCo stated it would use its refund to offset some product inflation. However, due to complexity and costs, few companies will pass refunds on to consumers. Notably, Nintendo in Japan is currently being sued by customers who argue that tariff refunds should be paid to consumers to offset the higher prices they paid.

Even deeper uncertainty?

The refund process itself is uneven. Companies with U.S. bank accounts and customs agents can receive refunds relatively smoothly. In contrast, Australian businesses shipping via Australia Post face significant delays—these shipments were not registered in the U.S. Customs and Border Protection refund system, and no clear refund pathway currently exists. Moreover, refunds do not necessarily reach the final payers. 'Instead, even if costs were ultimately passed on to retailers or consumers through higher prices, the refunds go to the importers.'

More importantly, Wagner argues that the most significant consequence of Trump’s tariff policy is the persistent uncertainty: 'Trump can instantly create business chaos and then use that chaos as leverage in negotiations with other governments.' A recent example is the U.S. imposing 50% tariffs on a range of Canadian goods, citing Canadian retaliation and discrimination against U.S. automobiles, dairy, and alcohol.

Wagner also predicts that ongoing uncertainty is driving global trade to split into competing blocs, where market access becomes more predictable within each bloc. 'The Supreme Court’s ruling did not recover lost customers, change business decisions, or restore confidence in predictable trade rules: tariffs can be refunded, but uncertainty cannot.'