Some US importers are turning to an unusual financing strategy: using Trump-era tariff refund claims as collateral for loans. The approach comes as companies await billions in payments tied to tariffs that were later cancelled.
Background: Trump-Era Tariffs and Unpaid Refunds
The US Supreme Court recently declared several tariffs unlawful, leaving roughly $166 billion in refunds unpaid. Over 330,000 importers initially paid these tariffs, resulting in numerous legal disputes and requests for reimbursement.
Previously, companies often sold their refund claims at steep discounts to secure immediate cash. Now, many are opting to retain ownership while using the claims as collateral for borrowing, preserving potential refund value.
Loans Backed by Refund Claims
Orrick partner Raniero D’Aversa explained that banks, hedge funds, and private credit firms are increasingly willing to finance tariff refund claims. These loans generally allow interest to accrue, with repayment scheduled once refunds are issued.
“Companies can avoid selling claims at reduced value, but they must consider high interest costs and uncertainty regarding when repayment will occur,” D’Aversa noted.
Neil Seiden, Managing Director of Asset Enhancement Solutions, added that loans typically require large claims exceeding $20 million, with minimum borrowing thresholds around $10 million.
Challenges and Risks
Experts estimate that refunds could take at least two years due to administrative delays, appeals, and eligibility reviews. This uncertainty forces companies to carefully weigh the trade-offs between selling claims outright or leveraging them as loan collateral.
Financial strain could arise if refund values decline or delays extend further, potentially impacting both borrowers and lenders. Lenders face the risk that the collateral—the tariff claims—could lose value, creating exposure in these high-stakes financing arrangements.
A Growing Trend
As importers navigate the complexities of unpaid Trump-era tariffs, using refund claims as loan collateral is emerging as a creative solution to maintain liquidity while waiting for reimbursement. The strategy highlights the intersection of trade law, finance, and risk management in today’s global economy.
