$81bn tariff refund hits US deficit as White House drafts new levies
A Supreme Court ruling has forced the US Treasury to refund $81 billion in invalidated tariffs, blowing a hole in the federal deficit and prompting the White House to draft new protectionist duties to bypass legal limits.
The US government has refunded $81 billion in tariffs invalidated by the Supreme Court, erasing the fiscal benefits of the administration’s trade policy and pushing the federal deficit higher. Budget data released on Monday shows the refund payout for the current fiscal year, which began in October 2025, surged from $5 billion during the same period last year. A Treasury official confirmed the spike was almost entirely driven by the February court ruling, with the bulk of the refunds processed in May and June.
The sudden outflow has reversed the deficit reduction achieved last year through tariff revenue. The shortfall reached $1.367 trillion in the first nine months of the fiscal year, a 2% increase. This deterioration occurred as the government spent more than $1 trillion on debt interest, up 14%, while military expenditure climbed 5% due to the conflict in the Middle East.
New duties to bypass court limits
The legal defeat has not deterred the White House from its protectionist agenda. A temporary 10% global tariff is scheduled to expire on July 24, but the administration is preparing replacement duties of 10% to 12.5%. These new levies would target major trading partners including the UK, Japan, India, Taiwan and China, citing lax enforcement of anti-forced labour laws and excess industrial capacity. The US has also threatened a separate 25% levy on Brazil.
By framing the new tariffs around labour and capacity issues, the administration aims to skirt the court-imposed limits that dismantled its previous tariff structure. This approach attempts to establish a legally viable justification for continued protectionism.
Tech tax triggers transatlantic threat
The most severe new threat is directed at Europe. The White House has warned of immediate 100% tariffs on any country that implements a digital services tax targeting US technology companies. This directly targets the UK, which levies a 2% tax on large tech firms like Apple, Google and Amazon, a policy that raised more than £800 million in 2024-25. France, Spain and Italy impose similar 3% taxes.
The president outlined the policy in stark terms on Truth Social. “Please let this statement serve to represent that any Country that imposes such a Tax will immediately be met with a 100 per cent TARIFF on any and all Goods sent to the United States of America. This TARIFF will supersede Trade Deals made with the Country, whether implemented, signed, or not. Additionally, the 100 per cent TARIFF will be immediately imposed, if they proceed.”
For international executives and investors, the statement signals a high-risk environment. Existing trade agreements offer no protection against sudden, punitive levies if domestic tax policies conflict with US interests.
