Here’s a fun bit of government accounting: sometimes you can lose a major legal battle, potentially owe back hundreds of billions of dollars, and still tell everyone the budget will be just fine. That’s essentially what Treasury Secretary Scott Bessent did on Friday, projecting that U.S. tariff revenue will stay "virtually unchanged" in 2026. This comes right after the Supreme Court delivered a stinging rebuke to the Trump administration by striking down its sweeping "reciprocal" import duties.
The ruling tossed out tariffs imposed under the International Emergency Economic Powers Act (IEEPA), a law meant for national emergencies. The court’s decision didn’t explicitly order refunds, but it opened the door for one—potentially requiring the government to return an estimated $130 to $175 billion it had already collected. When asked about that possibility, Bessent was characteristically calm. "So, they haven’t told us that we do have to repay it … But, we’ll see whether we have to repay," he said in an interview.
He then added a detail that makes the whole situation a bit less dramatic from a cash-flow perspective: "The full amount that we took in last year was about $130 billion. Treasury has more than $900 billion cash on hand." In other words, if the bill comes due, the check won’t bounce. It’s just a question of whether they have to write it.
The Tariff Shell Game
So how does the government plan to keep revenue flat after losing a major income stream? By playing a bit of tariff musical chairs. Bessent explained that the administration has already filed for a new tariff under Section 122 of the Trade Act, a never-before-used provision that allows for a 10% tariff on imports from any country for up to five months. This new tariff, set to take effect in three days, is designed to be a temporary plug.
It helps to understand the tariff landscape here. The now-invalid IEEPA tariffs were based on the president’s emergency powers. The other big buckets of tariff revenue come from Sections 232 and 301—established trade statutes for national security (232) and countering unfair trade practices (301). Bessent noted that last year, "about half the income that Treasury took in … was from the IEEPA tariffs, and about half was from the 232 and 301 tariffs."
The new Section 122 tariff is meant to offset the lost IEEPA money. This buys time—five months, to be exact—for the Commerce Department and the U.S. Trade Representative to conduct studies. Those studies could then be used to potentially justify adjusting or re-imposing tariffs under the more permanent Sections 232 and 301. It’s a bureaucratic workaround. "At Treasury, we believe that the 2026 tariff revenue will be virtually unchanged," Bessent concluded, betting that this shuffle will keep the money flowing.
