US tariff revenue turns negative $25 billion on IEEPA refunds

The U.S. government paid out more in tariff refunds than it collected in June, pushing customs revenue $25 billion into the red.

The U.S. government's customs duties receipts swung to a negative $25 billion in June as importers received refunds on tariffs the Supreme Court struck down in February, even as the Trump administration imposed new forced-labor levies on 60 trading partners.

"The United States has had a forced labor import ban for nearly a century, and rigorously enforces it; it's well past time for our trading partners to do the same," U.S. Trade Representative Jamieson Greer said in announcing the new duties.

The new tariffs, set at 10% for 17 economies and 12.5% for most others, took effect Friday as temporary 10% worldwide levies under Section 122 of the Trade Act of 1974 expired after their 150-day limit. Goods already in transit before Friday are exempt through July 28. American businesses paid roughly $166 billion in IEEPA tariffs before the Supreme Court ruling, according to the Tax Foundation, which estimated the earlier tariffs cost nearly $700 per household in 2026.

The negative revenue creates a direct fiscal shock — the government now owes billions in refunds — while the new Section 301 tariffs risk reigniting trade conflicts. Brazil called the U.S. move "arbitrary and unjustified" and plans retaliatory tariffs plus a World Trade Organization complaint, pointing to a fresh round of trade friction that could disrupt supply chains and raise costs for American importers.

Refunds Drain $25 Billion From Customs Revenue

The Supreme Court ruled in February that the International Emergency Economic Powers Act did not authorize the country-by-country tariffs Trump imposed in 2025, forcing the administration to refund duties paid under that authority. The $25 billion negative balance in June reflects the first wave of those reimbursements, with more refunds expected in coming months as the government processes claims from importers.

Phillip Magness, a senior fellow at the Independent Institute, said the forced-labor tariffs are the latest in a series of fallback options after courts curbed the administration's earlier tariff authorities. "These alternative strategies only differ in that they have varying degrees of vulnerability to a court challenge," he said. Studies from the Federal Reserve Bank of New York, the Kiel Institute for the World Economy, and Duke University all concluded that American consumers and businesses bear nearly the entire cost of tariffs, not foreign countries as the White House has maintained.

New Tariffs Face Legal and Diplomatic Pushback

The new forced-labor tariffs, imposed under Section 301 of the Trade Act of 1974, target countries the U.S. found failed to enforce bans on goods produced with forced labor. Some nations tightened enforcement and qualified for lower rates — India's tariff was reduced to 10% from an initial 12.5%, a senior administration official said. Exemptions include oil and gas, fertilizer, and products qualifying under the US-Mexico-Canada Agreement.

Human rights groups offered cautious support. "It's possible to be extremely critical of tariffs, as we are, and to be very concerned about blanket tariffs used as bludgeons against countries," said Martina Vandenberg, founder and president of The Human Trafficking Legal Center. "And yet I think it's undeniable that there is a significant response in terms of the adoption of import bans." She urged a phased approach to give countries time to build enforceable import ban mechanisms.

The previous Section 122 tariffs cost American businesses between $25 billion and $30 billion during their 150-day lifespan, according to estimates. With the new Section 301 tariffs now in place and a separate USTR probe into whether 16 countries — accounting for 70% of U.S. imports — have overproduced goods, the administration shows no sign of retreating from its protectionist stance ahead of the Nov. 3 midterm elections.

This article is for informational purposes only and does not constitute investment advice.