US refunds nearly $22B in tariffs in May, offsetting customs revenue

The US Treasury refunded nearly $22 billion in tariff revenue collected from importers in May, effectively canceling out customs duties taken in during the month, according to a Treasury Department statement on Wednesday.

The refunds marked the first major wave of repayments after the Supreme Court struck down a key part of President Donald Trump’s tariff policy, ruling that he lacked the authority to impose tariffs under the International Emergency Economic Powers Act.

The administration began processing refunds in April after the court decision. However, the final size of the repayments remains uncertain, as the administration has appealed a court order requiring refunds to every importer that paid tariffs collected under IEEPA authority.

The amount subject to the dispute totals about $166 billion, according to the statement.

Treasury Secretary Scott Bessent said at a congressional hearing last week that the money would be returned to companies that imported tariffed goods.

The refunds came as the federal budget deficit narrowed to $1.25 trillion in the first eight months of the fiscal year, down 9% from the same period last year.

Tariff revenue had made a significant contribution to Treasury coffers during the 2025 fiscal year, helping produce the smallest deficit in three years. Bessent has said tariff measures imposed under other legal authorities are expected to generate a similar amount of revenue for the government in 2026, although some of those measures are not yet fully in place.

Interest payments on US debt rose sharply in May, reaching $133 billion, up 44% from the same month last year.

Individual income tax withholdings, along with Social Security and Medicare taxes, increased to $286 billion in May from $247 billion a year earlier, while corporate tax receipts fell 67%.

For the full fiscal year, the deficit is expected to widen. The Congressional Budget Office projected in its February outlook that the deficit would reach $1.85 trillion in fiscal year 2026 and $1.89 trillion in 2027.