How a landmark Supreme Court ruling created a new kind of corporate hostage crisis — and why the city-state is watching with particular unease
I. The Victory That Wasn’t
On the morning of February 20, 2026, trade lawyers across America opened their phones to what looked like a clean win. The Supreme Court had upheld the Court of International Trade’s earlier ruling: President Trump’s blanket tariffs, levied under the International Emergency Economic Powers Act (IEEPA), were illegal. The duties should never have been collected. The law was clear.
By afternoon, it was obvious the law was the easy part.
Trump stepped to a podium and declined to commit to refunds. He called companies that had sued over tariffs “sleazebags.” He announced he would immediately invoke a separate statute — Section 122 of the Trade Act of 1974 — to reimpose a 10% global tariff by executive order, maintaining revenue pressure while the legal ground shifted beneath him. The Penn Wharton Budget Model estimated refund exposure at up to $175 billion. The administration signalled it had no intention of writing those cheques voluntarily.
What had looked like a legal resolution was, in structural terms, the opening of a second and potentially more punishing campaign — one waged not through tariff schedules but through bureaucratic attrition, political stigma, and the slow grind of lower-court litigation. Companies that wanted their money back would have to fight for it. And fighting, the president had made clear, came with a label.
The situation that has emerged is not simply a legal dispute. It is a collective action problem of unusual cruelty, and its effects will be felt far beyond American borders. In Singapore — a city-state whose economic architecture is built almost entirely on the premise that the rules of international trade are stable and enforceable — the implications are being absorbed with quiet alarm.
II. The Anatomy of the Trap
To understand why the refund issue is so structurally vicious, it helps to understand what companies are actually being asked to do.
The path to recovering already-paid tariff duties runs through the US Court of International Trade, a specialised three-judge federal tribunal in lower Manhattan that handles disputes over customs and import law. That court ruled the IEEPA tariffs illegal in 2025. The Supreme Court agreed. In principle, importers who paid those duties under an unlawful order are entitled to a refund.
In practice, recovering that money requires filing a legal action — individually, at the CIT — and navigating a process that the US Customs and Border Protection agency has yet to even provide guidance on. The CBP, embedded within the Department of Homeland Security, is currently operating under a government shutdown, meaning the bureaucratic machinery needed to process refunds is dormant precisely when importers most need it to move.
There is a further complication. Under US customs law, tariff assessments on individual shipments go through a process called “liquidation” — a final administrative determination of duties owed. Once a shipment’s assessment is liquidated, challenging it becomes dramatically harder. Companies have been racing to file protective suits at the CIT specifically to freeze the liquidation clock, preserving their legal standing before that window closes. More than 1,500 companies had already filed such suits as of the ruling, according to Bloomberg’s analysis, representing a preemptive legal mobilisation of striking scale.
But here is where the trap closes. Filing suit — even a protective, purely procedural filing — is now a politically charged act. The president has publicly characterised companies pursuing tariff refunds through courts as antagonists. For multinationals with federal contracts, pending regulatory approvals, or businesses operating in sectors subject to executive discretion — defence, pharmaceuticals, telecommunications, financial services — the calculation is not simply about legal fees versus expected recovery. It is about whether suing the administration over trade policy creates downstream exposure across an entire relationship with the federal government.
Erik Smithweiss, a trade partner at GDLSK, described the situation with barely restrained indignation: American companies are being told that the only mechanism to recover money the government unlawfully collected is litigation, and that choosing to litigate risks being called a sleazebag by the president of the United States. Terry Haines of Pangaea Policy was blunter still in his note to clients: those expecting refunds any time soon — or at all — are dreaming.
The collective action dimension is this: if enough companies calculate that the reputational and political risk outweighs the financial benefit of pursuing refunds, they will absorb the loss quietly. The administration, having illegally collected hundreds of billions of dollars, would face no organised legal pressure to return it. Individual rational decisions, aggregated, produce a collective capitulation that no single actor intended.
This is a structural incentive for governments to behave illegally, collect what they can, and then make the cost of legal recourse high enough that the money sticks.
III. Singapore’s Particular Exposure
Singapore is not a peripheral actor in this drama. It is one of the most trade-exposed economies on earth, with total goods and services trade amounting to roughly three to four times its GDP — a ratio that makes even export-dependent neighbours like South Korea or Taiwan look domestically anchored by comparison. The United States is consistently among Singapore’s top two or three trading partners, and the relationship spans not just goods but a dense web of services, financial flows, investment, and supply chain integration.
The IEEPA tariffs, before the court struck them down, applied to Singapore at a rate of 10% under the baseline “reciprocal tariff” framework — a rate lower than the punitive levels applied to China or Vietnam, but still significant for a trading hub operating on thin margins and high volumes. Singapore’s electronics sector, which accounts for a substantial share of its non-oil domestic exports, was among the most directly affected. Semiconductors, precision instruments, and disk drives — products where Singapore sits in the middle of complex global supply chains connecting American chip designers to Asian manufacturers — all moved through tariff regimes that added friction and cost.
What made Singapore’s position especially uncomfortable was not the tariff rate itself but the structural vulnerability it exposed. Singapore’s value proposition as a trade and logistics hub rests on predictability. Companies locate regional headquarters, treasury centres, and supply chain operations in Singapore partly because of the city-state’s extensive network of free trade agreements — including the US-Singapore FTA signed in 2003 — and partly because Singapore represents a rule-of-law jurisdiction in a region where that is not always guaranteed. When the dominant actor in global trade starts treating its own legal obligations as negotiable, Singapore’s fundamental pitch is called into question.
The city-state’s electronics and chemical exporters who shipped goods to the United States during the period when IEEPA tariffs were in force — roughly from early 2025 through the ruling — now face the same refund question as American importers, though from a different angle. The legal liability for duties in the US system sits with the importer of record, which is typically the American buyer or a customs broker acting on their behalf. Singaporean exporters are not direct parties to the CIT refund process. But they are indirect parties in the most consequential sense: the distribution of who actually bore the economic cost of the tariffs — through price adjustments, renegotiated contracts, margin compression, or absorbed losses — will determine who benefits from any refund recovery.
In many cases, Singaporean exporters lowered their prices or restructured payment terms to help American buyers absorb tariff costs and maintain order volumes. If those American buyers now recover refunds without passing the benefit upstream, Singaporean firms will have permanently subsidised an illegal American trade policy with no recourse whatsoever.
IV. The Singapore Business in the Hostage Position
Consider a hypothetical that is, in practice, far from hypothetical. A Singapore-based precision engineering firm — there are dozens of such companies in Jurong and Tuas, supplying components into American medical device and semiconductor equipment supply chains — spent much of 2025 renegotiating contract prices with its US customers to help them manage tariff exposure. It may have absorbed a margin reduction of four to six percentage points on US-bound shipments over eighteen months.
The American importer, now eligible in principle for a CIT refund, faces a choice: file suit, navigate the bureaucratic and political minefield, and potentially recover duties paid — or stay quiet, preserve its federal relationships, and write off the loss. If it files and recovers, does it return any portion to the Singaporean supplier that helped it survive the tariff period? There is no legal mechanism compelling it to do so. The contract that governed their relationship was written before the tariff regime existed. The margin concession was informal, a relationship accommodation.
This is the Singapore exporter’s position in the collective action problem: structurally absent from the refund litigation, having borne real costs, with no standing in American courts, and dependent on the goodwill of a trading partner whose own incentive calculus is being distorted by presidential pressure.
Singapore’s government has, characteristically, responded with diplomatic dexterity rather than confrontation. The Ministry of Trade and Industry and the Economic Development Board have been monitoring the tariff situation closely, and Singapore officials have consistently emphasised the importance of WTO-consistent trade rules and the risks of unilateral trade actions. Singapore raised its GDP growth forecast revisions cautiously in 2025 as tariff uncertainty weighed on manufacturing output, and the Monetary Authority of Singapore maintained a slightly accommodative exchange rate policy through the period to cushion external headwinds.
But policy tools can only absorb so much. If the refund process drags on for years — as now appears likely — the uncertainty itself becomes an economic cost. Capital allocation decisions, supply chain reconfiguration plans, and investment commitments all require a stable baseline understanding of what trading with the United States actually costs. A prolonged legal limbo, in which duties technically found to be illegal remain economically unrecovered, is effectively a permanent partial tariff maintained by administrative inertia.
V. The Rule of Law as a Trade Asset — and Its Devaluation
Singapore Prime Minister Lawrence Wong has spoken carefully but clearly about the risks of a fragmented global trading order. Singapore’s entire development model — from its establishment as a free port in 1965 through its aggressive pursuit of bilateral and multilateral trade agreements — has been premised on the belief that trade rules, once agreed, are enforced. That a country can sign a free trade agreement with the United States, as Singapore did in 2003, and then face IEEPA tariffs levied in defiance of that agreement’s provisions, represents precisely the kind of rules erosion that Singapore’s strategic positioning was designed to insulate against.
The IEEPA ruling is, in one sense, a vindication of that rules-based order: American courts have functioned as designed, checking executive overreach. But the post-ruling landscape — in which the executive resists enforcement, refunds are contested for years, and companies are politically punished for pursuing legal remedies — reveals the gap between the existence of rules and their practical enforceability. A trade agreement whose violation can be sustained for years through bureaucratic delay, while the violating government faces no immediate consequence, offers weaker protection than its text implies.
For Singapore, this has strategic implications beyond the immediate tariff dispute. The city-state’s bet on international rules and institutions — its support for WTO dispute resolution, its hosting of regional legal arbitration infrastructure, its cultivation of a reputation as a neutral, law-governed commercial hub — becomes more valuable and more precarious simultaneously. More valuable because rule-of-law jurisdictions become rarer and more sought-after as major powers treat legal obligations as optional. More precarious because Singapore’s neutrality and institutional credibility depend on those same major powers having some residual respect for the framework.
When the world’s largest economy treats a Supreme Court ruling as a bureaucratic inconvenience to be managed through delay and political intimidation, it does not simply create a refund problem for importers. It degrades the epistemic foundation on which international commercial relationships are built: the assumption that legal determinations mean something and that losses found to be unlawful will actually be remedied.
VI. What Comes Next
The near-term trajectory is reasonably legible, even if the timeline is not. The Court of International Trade will become the primary battlefield. Individual importers — likely coordinating through industry associations and shared legal counsel to distribute costs — will file or have already filed for refunds. The government will contest, delay, raise liquidation arguments, and seek to distinguish which shipments qualify. The CBP, once the shutdown ends, will issue guidance that is likely to be narrower and more burdensome than importers hope. Some companies, calculating that the political exposure outweighs the financial recovery, will not file. Others, particularly large multinationals with less acute federal relationship exposure, will pursue refunds aggressively.
For Singapore, the critical variable is how quickly and completely American importers recover — and whether supply chain pricing relationships are renegotiated to reflect that recovery. Industry associations representing Singapore exporters should, at minimum, be documenting the margin concessions made during the tariff period now, before institutional memory fades and contractual renegotiations become harder to anchor to historical data.
The MAS and MTI will continue to watch the situation through the lens of exchange rate management and trade diversification — twin levers Singapore has used effectively but which have diminishing returns when the underlying trade relationship remains structurally uncertain.
The longer political observation is this: the collective action problem that the Trump administration has engineered around tariff refunds is a preview of a new kind of economic coercion. It operates not through explicit sanctions or tariff schedules but through the weaponisation of legal process itself — making the cost of enforcing rights high enough that rights go unenforced. For small, trade-dependent states that cannot credibly threaten retaliation and whose leverage in any bilateral dispute is structurally limited, this is a particularly concerning template.
Singapore has survived and thrived by making itself indispensable — by being the place where rules work, deals close, and relationships are honoured across political cycles. That proposition has never been tested quite like this.