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

Although the government is refunding many tariffs, most of the money is going to businesses and importers — not consumers. Elise Amendola/AP hide caption

Last year, Sandra Alonso needed a new powered wheelchair to get around her city of Tampa, Fla., after wearing out her old one.

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So she ordered the same model because she knew she could easily fold it and lift it without anyone's help.

"It's just the perfect chair for me," she said.

Unfortunately for Alonso, the chair is made in China, and when she bought it last year, tariffs on Chinese goods were a sky-high 145%. She paid an extra $3,500.

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

Alonso thought she should get the refund after the Supreme Court in February ruled that many of President Trump's tariffs were illegal , leading to the federal government having to refund more than $160 billion that it had collected.

The thing, however, is that the federal government can't give her that money back. That's because it is instead returning the cash to the importers that directly paid those tariff fees, typically American businesses.

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Those companies passed on some of the extra cost to customers, usually in the form of higher prices. But few are stepping up to share the refunds.

"It's all just a giant transfer from consumers to corporations," said Michael Ettlinger, a senior fellow at the Institute on Taxation and Economic Policy. "You can't really design a worse tax than that."

Shipping companies' refunds are the exception

Alonso is actually lucky — she imported her chair through UPS, which told her in an email that her refund is in the works. The company said it can take up to 90 days to get the cash to customers after the company receives it from U.S. Customs and Border Protection.

In fact, UPS, FedEx and DHL have all pledged to pass along refunds they get from the government to customers.

Part of the reason for that is shippers explicitly charged customers tariff fees — if the federal government charged FedEx $100 to import your package, FedEx then billed you $100.

"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," said Terence Lau, dean of Syracuse University's college of law. "Otherwise it would be a pretty open-and-shut lawsuit against them for unjust enrichment."

Retailers are another thing altogether though

But do not expect the same from retailers . Many of them did not spell out how much customers were paying for tariffs and instead baked that cost directly into higher prices.

It's hard, maybe even impossible, for the companies to know how much extra each shopper paid because of tariffs. These import taxes were rarely tracked with individual products sold and were often spread out across the supply chain, making it difficult to know how much of the tariff was directly passed on to the customer.

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"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 businesses, both small and massive, shipping and its costs can function as a black box they know little about, said Robert Shapiro, chair of 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."

Retailers say they'll use the tariff to cover gas bills and lower prices

Home Depot received about $730 million in tariff refunds during the last quarter but did not mention any plans of refunding customers. Instead, CFO Richard McPhail told investors on a call this week that the company would use that cash to cover new costs from pricier gasoline and diesel, "that we expect will fully offset the benefit from tariff refunds over the year."

Some companies like Costco and Nintendo are facing class action lawsuits from shoppers demanding refunds. The gaming giant asked the court to dismiss the lawsuit, arguing in the filing that "plaintiffs received exactly what they paid for: Nintendo products that plaintiffs knowingly and voluntarily purchased at the advertised price."

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Walmart executives said they had received most of the $2.9 billion in refunds they were eligible for and plans to use those dollars to lower prices for customers, rather than provide direct refunds.

Michael Ettlinger with the Institute on Taxation and Economic Policy said he's not impressed with promises to cut prices and said companies could do more. But he also said those businesses were put in a tough position by the Trump Administration and it would be an enormous cost to figure out how to get back the money to all a company's customers.

"It's important to keep an eye on what the real sin here is, which is that the government imposed illegal tariffs," Ettlinger said.

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