Businesses are getting tariff refunds. Why aren't consumers getting their cut?

The federal government has begun refunding more than $160 billion in tariffs that it collected after a Supreme Court decision in February ruled that many of President Trump’s trade levies were illegal. However, the money is largely flowing back to the importers and manufacturers that paid the duties, not to the consumers who ultimately bear the cost in higher prices.

Sandra Alonso, a resident of Tampa, Florida, illustrates the gap. Last year she ordered a new powered wheelchair from China, paying an extra $3,500 because the tariff on Chinese goods was 145 percent. When the government announced refunds, Alonso expected a reimbursement, but the Treasury returned the money to the U.S. company that imported the chair, not to her. She received a notice from UPS, the freight carrier that handled her shipment, that the refund would take up to 90 days to reach her.

Shipping firms are an exception. UPS, FedEx and DHL have pledged to pass along the refunds they receive to customers, because the carriers bill the tariff fee directly to the shipper. “If FedEx or UPS has been charged a tariff and then refunded, they are obligated to give the money back to the customer who paid it,” said Terence Lau, dean of Syracuse University College of Law. The carriers are also protected from lawsuits for unjust enrichment if they comply.

Retailers, by contrast, have largely absorbed the tariff costs into their product pricing. Most do not itemize the duty on individual items, and the tax is spread across the supply chain. “It’s like the retailer stirred the tax into the batter,” said Lau. As a result, companies find it difficult to calculate how much of the tariff was passed on to each shopper and to return that amount.

Large retailers have announced how they will use the refunds. Home Depot received roughly $730 million in tariff refunds last quarter, but CFO Richard McPhail told investors that the cash would be used to offset higher fuel costs rather than be returned to customers. Walmart, which received most of its $2.9 billion in eligible refunds, plans to lower prices for shoppers instead of issuing direct reimbursements. Michael Ettlinger, a senior fellow at the Institute on Taxation and Economic Policy, said the companies could do more, but noted the difficulty of reallocating billions to every customer.

Some firms face legal pressure. Costco and Nintendo are being sued by shoppers who claim they paid more because of tariffs. Nintendo asked a court to dismiss the suit, arguing that “plaintiffs received exactly what they paid for: Nintendo products that plaintiffs knowingly and voluntarily purchased at the advertised price.” The lawsuits highlight the tension between corporate cost management and consumer expectations.

Experts point out that the refunds represent a “giant transfer from consumers to corporations.” The Treasury’s policy has not changed the fact that most of the money will be absorbed by businesses that can spread the savings across their operations. While a few carriers will return the exact amount to individual customers, the bulk of the refunds will go to companies that can use the cash to cover other expenses or to reduce prices in ways that are not guaranteed to reach every buyer.

In short, the tariff refunds are largely a corporate benefit. Consumers who paid extra for imported goods may see only modest price reductions, if any, while the bulk of the money is redirected to the businesses that originally paid the duties. The federal government’s decision to return the tariffs to importers rather than to consumers underscores the complex economics of trade policy and the challenges of translating policy changes into direct consumer benefits.