Target gets billion-dollar tariff refund—will customers see any benefit?
The retail giant Target has disclosed a nearly billion-dollar refund from President Donald Trump’s now-annulled emergency tariffs, though consumers may be left waiting to see whether they will share in this windfall.
On Wednesday, Target published its results for the second quarter, revealing a 5.3 percent year-over-year lift in sales as net earnings doubled to nearly $1.9 billion—the latter thanks to a $994 million refund received during the quarter. Target lifted its annual guidance on the back of these results—which came in ahead of Wall Street forecasts—and noted the significant impact from the rebate in the three months which ended August 1.
Analysis from Citi Research had predicted that Target could be due over $2 billion in refunds. During an earnings call following the results, Chief Financial Officer Jim Lee said that the company was expecting further refunds in the coming months, but that the amount received so far accounts for “the significant majority” of those it had applied for.
“We continue to look first to find other means to reduce the impact of tariffs, including changes to country of origin, collaborating with vendors to find offsets, and adjusting our assortment,” Lee said. “Those tactics have helped us reduce tariff pressure while continuing to deliver the combination of style, design, and value consumers expect from Target.”
Newsweek has contacted Target via email outside of regular working hours for comment and is awaiting a response.
Will Target Share the Refunds?
In February, the Supreme Court annulled the majority of Trump’s levies after ruling that these had been imposed using an overly expansive reading of the 1977 International Emergency Economic Powers Act (IEEPA).
Consumers in many cases absorbed these costs in the form of higher prices, resulting in an effective $1,000-per-household tax increase last year, according to the Tax Foundation. However, only businesses themselves—the importers of record—were eligible to apply and now receive a refund.
Some companies have pledged to issue refunds directly to consumers when they receive their rebate, and others have committed to investing this into price cuts for customers.
Target has given no indication that it plans to pass a portion of the $994 million windfall on to consumers, but executives say the funds will help sustain its ongoing push for competitive prices.
“We have, and we will continue to, invest in price to ensure our guests are getting tremendous value each and every time they visit us at Target,” Lee said in a statement to Modern Retail on Wednesday.
“We’ve already lowered prices on more than 10,000 items over the last 12 months and are planning for additional price reductions yet this year,” Lee said during Wednesday’s earnings call, though he did not comment on whether this strategy was supported by the rebate.
How Much Has the Government Paid Back?
In late July, the government said it had issued around $100 billion in tariff rebates—the majority of the $166 billion it previously estimated that importers paid under the now-invalidated duties.
Joseph Spraragen, an international trade attorney and partner at GDLSK LLP, previously told Newsweek that the refund process was “working well” but that not all of the paid tariffs were likely to be refunded.
“I would anticipate that 10-15 percent of the duties collected will not be refunded,” he said, noting ongoing debate over whether certain customs entries were completed and the number of importers who may be owed refunds, but who have not filed for these for whatever reason.
How Other Companies Are Using Their Rebates?
Major American companies are adopting different approaches to using the millions of dollars in refunds they are now receiving from the government, after President Donald Trump’s tariffs were struck down by the Supreme Court in February.
Amazon
Amazon executives said the company received around $600 million in tariff refunds during its second financial quarter. In terms of sharing this with consumers, Chief Financial Officer Brian Olsavsky said that Amazon had absorbed the tariffs in most cases, but had identified a “limited set of circumstances” where import surcharges were passed on to customers. In these cases, Olsavsky said the company would “proactively contact affected customers and automatically issue refunds to them.”
Apple
Apple received an estimated $2.2 billion boost from tariff refunds in its third quarter, but the company has not promised to share any of this with its customers.
Instead, CEO Tim Cook said that Apple planned “to reinvest the tariff refunds we’ve received into the U.S.,” suggesting that this would contribute to its $600 billion, four-year American investment strategy.
Walmart
On Thursday, Walmart reported that net sales rose 3.5 percent to $125 billion and gross profit increased 9.4 percent year over year to $36.8 billion in the second quarter. The company attributed the latter to “the benefit associated with tariff refunds and improved business mix,” which was “partially offset by price investments and higher fuel costs.”
In a press release, Walmart said it would continue utilizing refunds for “customer experience and price investments in the second half.”
Back in May, Walmart’s chief financial officer, John David Rainey, said that when it came to employing any refunds, the retailer would “definitely bias and prioritize price investment.”
Lawmakers Push for Consumers To Benefit From Refunds
Other companies, such as FedEx and Costco have vowed to return refunds to their consumers, but members of Congress are pushing for a wider distribution given that consumers shouldered the tariff burden last year.
Earlier this month, Democratic Massachusetts Senator Elizabeth Warren sent a letter to several companies—including Apple, Amazon, Nike, Target and Walmart—requesting specifics about how much they were receiving in tariff refunds and pressing them to pass these onto their customers.
“I urge you to pass along any refund you may receive to the consumers who paid higher prices for your products while the tariffs were in place,” Warren wrote.
Rand Paul, one of the main Republican critics within Congress of Trump’s tariffs, has likewise argued that consumers should share in any refund windfall and that companies should lower their prices to reflect the invalidation of the duties.
“When the tariffs are on, prices at Walmart are high; when the tariffs are removed, the prices [should] come back down,” the Kentucky senator told LEX News this week.
Contact Newsweek editors on this story: Daniel Orton and James Debens
