With the U.S. Supreme Court’s ruling that President Donald Trump’s International Emergency Economic Powers Act tariffs were illegal, companies have been hurrying to get compensation from the government. Yet, research shows that American consumers bore the brunt of the costs.
How are they expected to be compensated? A new lawsuit filed against Washington state-based wholesale retailer Costco hopes to answer that question.
“Plaintiff seeks a judgment that Costco is obligated to return to Plaintiff and proposed Class Members all IEEPA duties passed on to customers in the form of higher prices on products, with interest,” said the suit, filed Wednesday in Illinois.
Previously, Audacy covered two reports that showed the tariffs had the most impact on American consumers. One analysis from the non-partisan Tax Foundation group found that the tariffs resulted in annual tax increases of over $1,000 per U.S. households and a report from Kiel Institute for the World Economy found that foreign exporters absorbed only about 4% of the tariff burden, with the other 96% passed through to U.S. buyers. Goldman Sachs also found that U.S. consumers are “shouldering two-thirds of President Trump’s new tariff costs,” said the new lawsuit.
According to the suit, Costco (the third largest retailer in the world) is one of thousands of companies that have filed lawsuits in the Court of International Trade (CIT) seeking refunds for IEEPA tariffs. Even before the Supreme Court’s decision, Costco filed a suit in that court last year claiming the tariffs were unlawful.
Holland & Knight, a law firm, noted that CIT Judge Richard Eaton issued a March 4 Refund Order following a case brought by an importer against U.S. Customs and Border Protection seeking refunds of previously paid IEEPA tariffs. However, getting refunds might be hard even for importer companies, let alone consumers.
In a Friday update, Hunton, another law firm, said that Eaton suspended the order two days later after CBP “represented that its systems are not currently able to prices the high volume of affected entries without significant manual effort and system changes.” That means that, though the tariffs have been deemed illegal, financial recovery will be a tricky process, the law firm explained. It said that importers shouldn’t assume that refunds will be issued automatically.
Libertarian thinktank Cato Institute said Thursday that it’s possible the complicated road ahead may “deny many American firms the money that the government owes them and will likely cost taxpayers billions of additional dollars in interest.” The Wall Street Journal also said that though the Trump administration has been ordered to refund $166 billion in tariff revenue it collected, it’s “unclear how or when it will happen.”
Per the lawsuit filed in Illinois this week, Costco has already brought in “windfall profits generated by the unlawful tariffs imposed by the Trump Administration,” by passing the costs off to its customers. It argues that, if Costco receives its refund, that will amount to “double recovery.”
“While the importer of record is the only party that may recover a refund from the government for an improperly assessed tariff, the importer is often nothing more than a pass-through vehicle,” said the suit. “Frequently, the importer simply fronts the cost of the tariff, and is made whole by imposing higher prices on consumers. The consumer, for all intents and purposes, pays the tariff,” but is left with no way to get their money back.
Costco would not be required to give anything back to those consumers who bought goods at higher prices due to the IEEPA tariffs under federal trade law, the suit noted. Furthermore, it said that the Costco has “made no commitment to return any portion of anticipated tariff refunds to the consumers who bore those costs.”
In fact, Costco CEO Ron Vachris said refunds would be used to provide “lower prices and better values” to Costco members, according to Axios.
“That commitment, to the extent it exists at all, is not a commitment to compensate the specific individuals who paid elevated prices during the Class Period – it is a promise of possible future benefit to an indeterminate group of future shoppers,” the suit argued.
The Wall Street Journal reported this week that a Costco spokesman said the company had no comment on the lawsuit.
Fox Business noted that “FedEx, which has also filed suit in the Court of International Trade to recover tariff refunds, is facing a similar class action lawsuit that was filed in late February by shippers who paid higher prices due to the tariffs.”