Retailers receive $5.7B in tariff refunds as price wars begin

Retailers including Walmart, Costco and BJ's Wholesale Club are receiving billions in tariff refunds after the Supreme Court ruled IEEPA tariffs illegal — and some are already using the cash to cut prices.

The Supreme Court's February ruling that struck down IEEPA tariffs has unlocked an estimated $5.7 billion in refunds for major U.S. retailers, with early recipients like BJ's Wholesale Club passing a portion of the savings to shoppers through lower prices.

"As a result, we saw roughly half a point of deflation in our retail pricing, and our price gaps improved as we leaned into delivering meaningful savings for our members," BJ's Chief Executive Officer Bob Eddy said during the company's latest earnings call.

The refunds stem from more than $160 billion in tariffs collected under the International Emergency Economic Powers Act through January 2026, before the Supreme Court allowed a lower-court ruling to stand that determined the tariffs exceeded presidential authority. U.S. Customs and Border Protection has since launched its Claims and Appeals Processing Environment portal to process an estimated $166 billion in refunds. Bernstein analyst Zhihan Ma estimates that retailers in her coverage universe will receive roughly $5.7 billion, representing 35 to 75 basis points of their U.S. sales. Walmart has said it expects more than $3 billion in refunds, or about 50 basis points of its U.S. net sales, while Dollar Tree received $110 million in the first quarter.

Whether the refunds meaningfully reach consumers depends on how retailers balance pricing against profitability. Walmart Chief Financial Officer John David Rainey said the company intends to "invest in the customer and invest in price," while Costco Chief Executive Officer Ron Vachris said the warehouse club plans to return savings to members "in some form." The commitments carry weight because American families incurred more than $1,700 in tariff-related costs during the period the duties were in effect, according to estimates from the Joint Economic Committee. Yet no major retailer has included refunds in earnings guidance, leaving the bottom-line impact uncertain.

The refunds arrive as consumer stocks lag the broader market. The State Street SPDR S&P Retail ETF has gained just 3 percent year to date, while the S&P 500 has risen 7.5 percent. The Consumer Discretionary Select Sector SPDR ETF is in negative territory for 2026. Bernstein's Ma said the payments are unlikely to provide a meaningful catalyst for the sector, given the lack of clarity around how much will flow to bottom lines versus being shared with suppliers or reinvested in pricing.

For products where suppliers are the importers of record, they receive tariff refunds directly and may share some benefit with retailers — and vice versa. This revenue-sharing dynamic makes it difficult for investors to model the net impact. "Our expectation is that price leadership like Walmart and Costco will look to pass on value to their customers or members to drive share gains," Ma wrote in a note. "This could force the hand of others."

Price competition intensifies as refunds flow

BJ's provided an early case study in how refunds can reshape pricing. The company said tariff refunds contributed roughly 50 basis points to its quarterly merchandise margin, amounting to approximately $20 million. Gross profit rose to $1.03 billion from $969.5 million a year earlier, even as merchandise gross margin declined about 10 basis points — a decline the company attributed primarily to investments in pricing partially offset by the tariff refund benefit.

The last time tariff policy shifted this dramatically was during the initial imposition of Section 301 tariffs on Chinese goods in 2018, when U.S. retailers absorbed roughly $1.5 billion in higher costs over the first year, according to a Federal Reserve study. The current refund cycle is larger in scale and faster in execution, with the CBP typically processing claims within 60 to 90 days of a successful filing.

What happens next

The National Retail Federation has urged members to file claims promptly. "Refunding the illegal IEEPA tariffs back to the businesses that paid them is pro-worker, pro-customer and pro-growth," said Jonathan Gold, the NRF's vice president of supply chain and customs policy. "When retailers and small businesses can invest with greater certainty, consumers benefit through more competitive pricing."

Whether more retailers follow BJ's lead and whether price reductions become meaningful enough for consumers to notice remains uncertain. The outcome could depend on the timing of refunds, competitive pressure, and how companies balance pricing with profitability. For now, the refunds offer a potential cushion against transportation and packaging inflation — but they are unlikely to single-handedly reverse the fortunes of a consumer sector that has struggled to capture investor attention in an AI-driven market.

This article is for informational purposes only and does not constitute investment advice.