Most tariff refunds flow to businesses as consumer repayment lags

Carriers commit to passing refunds; retailers argue the costs are untraceable

The Supreme Court’s February ruling invalidated many of the tariffs the Trump administration had imposed, requiring the federal government to return more than $160 billion it had collected from importers. U.S. Customs and Border Protection is sending those refunds to the entities that originally paid — typically American businesses — rather than to the consumers who ultimately absorbed some of the extra cost through higher prices on imported goods.

The disconnect is real for individual buyers. Sandra Alonso, a Tampa resident, ordered a new powered wheelchair last year after wearing out her old one. The chair she needed is made in China, and at the time she bought it, tariffs on Chinese goods stood at 145%. She paid $3,500 more than she otherwise would have.

“There’s no reason I had to pay double for this chair,” Alonso said. “The federal government should give me my money back.”

Alonso is among the consumers in a position to receive something back. Because she imported her chair through UPS — and because carriers explicitly itemized tariff fees on shipping bills — UPS told her in an email that her refund is in the works. The company said it can take up to 90 days for the cash to reach customers after UPS receives it from CBP. UPS, FedEx and DHL have all pledged to pass along refunds they receive from the federal government to their shippers and customers.

The legal logic behind the carriers’ pledges is straightforward, according to Terence Lau, dean of Syracuse University’s college of law. “Now that FedEx and UPS have received a refund of that $100 from the federal government, they are absolutely obligated to return it to the person they collected it from,” Lau said. “Otherwise it would be a pretty open-and-shut lawsuit against them for unjust enrichment.”

The carriers face a clearer obligation because they charged customers the exact tariff amount as a separate line item. Retailers face a more difficult accounting problem. Many absorbed the tariff cost into general pricing rather than itemizing it, making it nearly impossible to determine how much each shopper paid because of tariffs.

“It’s like the retailer stirred the tax into the batter,” Lau said. “So once it’s cooked into the cake you can’t just back it out ingredient by ingredient anymore because it’s not separated.”

For large companies, the costs of these tariffs were often invisible even to senior executives, said Robert Shapiro, who chairs the international trade group at the law firm Thompson Coburn. “I’ve had CEOs of big businesses say to me, ‘are we paying these tariffs?’” Shapiro said. “And they paid millions of dollars in tariffs. But it got rolled into the price of goods.”

Some large retailers have begun disclosing how they plan to use the refunds. Home Depot received approximately $730 million in tariff refunds during the last quarter and does not plan to return that money to customers. Instead, Chief Financial Officer Richard McPhail told investors on a call that the company will use the cash to cover new costs from “pricier gasoline and diesel, that we expect will fully offset the benefit from tariff refunds over the year.”

Walmart executives said they have received most of the $2.9 billion in refunds they were eligible for and plan to use that money to lower prices for customers rather than to provide direct refunds. Michael Ettlinger, a senior fellow at the Institute on Taxation and Economic Policy, said businesses were put in a tough position by the tariff policy and that calculating per-customer refunds would be an enormous cost.

Some shoppers are pursuing legal channels. Costco and Nintendo are facing class action lawsuits from consumers demanding refunds. Nintendo asked the court to dismiss its case, arguing in a filing that “plaintiffs received exactly what they paid for: Nintendo products that plaintiffs knowingly and voluntarily purchased at the advertised price.”

Ettlinger framed the overall refund arrangement as an inequity driven by the tariff system’s structure, not by the companies receiving the money. “It’s all just a giant transfer from consumers to corporations,” Ettlinger said. “You can’t really design a worse tax than that.” But, he added, “It’s important to keep an eye on what the real sin here is, which is that the government imposed illegal tariffs.”