America’s Biggest Retailers Receive Tariff Refunds

As the federal government returns billions of dollars in tariffs to businesses, America’s largest retailers are now faced with a decision on how to spend the money. Amazon, Target, and Walmart are among the retailers that have received significant refunds.

According to reports, the Trump administration has returned over $100 billion to businesses following the Supreme Court’s ruling in February that struck down tariffs imposed under the 1977 International Emergency Economic Powers Act (IEEPA). This represents about 60% of the total $166 billion collected under the IEEPA tariffs.

David Silverman, senior director at Fitch Ratings, notes that the billions in refunds present a predicament for businesses due to the perception by consumers that they ultimately paid the cost of those tariffs through higher prices.

Each retailer is taking a different approach to utilizing the tariff refunds. While some are offsetting higher costs and cushioning their margins, others are investing in marketing and cutting prices.

Walmart, for instance, received approximately $2.9 billion in tariff refunds, amounting to about 0.5% of its annual US net sales. The company plans to use the returns to lower prices in areas where customers are flocking, such as grocery and general merchandise.

Target received $994 million in tariff refunds in the second quarter and used the cash to boost its margins, which contributed $1.65 to its $4.11 earnings per share. In the past year, the company cut prices on more than 10,000 items.

Amazon executives said the company received an approximate $600 million payout. While the company is not the importer of record for the majority of items it sells since suppliers source the products, it has identified a limited set of circumstances where it can trace specific import charges to customers and will proactively contact affected customers and automatically issue refunds to them.

Home improvement giants Home Depot and Lowe’s are also considering different strategies. In the second quarter, Home Depot received $730 million in tariff refunds and used $685 million of that to reduce its cost of goods sold, helping to boost margins by offsetting higher prices for fuel, energy, resin, and metals, as well as other unplanned expenses in the second and third quarters.

Lowe’s CEO Marvin Ellison told Yahoo Finance that the company has received $80 million back so far and has filed to receive additional refunds. Ellison noted that the company is weighing how to use the funds, looking at various options that will benefit customers without being overly promotional.

No matter what, companies are in a different spot than they were a year ago as uncertainty around trade policy lingers. The upside is that these companies have spent the last year plus thinking about mitigation strategies, thinking about supply chain, shifts, thinking about merchandising, … and at least now to the extent that there are updated tariffs …these companies have built somewhat of a playbook to figure out what to do about them, Silverman said.