Why tariff refunds won’t necessarily go back to consumers

Supply Chain Shakeup // April 29, 2026 Why tariff refunds won’t necessarily go back to consumers By Julia Waldow Ivy Liu Thousands of U. S. retail companies are eagerly awaiting tariff refunds from the Trump administration.

But shoppers, who have been squeezed by everything from tariffs to rising gas prices over the past year, are unlikely to see a large piece of those refunds. On April 20, companies could start requesting refunds for illegally collected tariffs tied to the International Emergency Economic Powers Act of 1977.

But for many businesses, the cost of recently struck-down tariffs — about $175 billion, with interest taken into account — goes far beyond a bill from the government. Brands paid more to import goods into the U. S. , yes, but that’s only one piece of the puzzle.

Some brands, for example, paid higher shipping costs to get products in before tariff deadlines hit. Raw material costs also rose throughout 2025. To avoid raising prices, some brands dipped into their cash reserves. Others took out loans to pay for tariffs.

Growth initiatives, like hiring additional employees or increasing marketing budgets, were also put on pause. Put together, it means that most brands can’t simply give whatever money they receive from the government back to shoppers.

“There’s a cost to capital that isn’t just money,” David Suk, CEO of portable bottle warmer company Baby’s Brew, told Modern Retail. Thanks to tariffs, Baby Brew’s operating costs skyrocketed, he said. “Looking at giving money back to consumers, [we’d] still be at a loss,” Suk said. “It isn’t a one-to-one.”

Consumers, reading headlines about the tariff refund process, may have a different scenario in mind. Earlier in April, consumers filed a class-action lawsuit against Nintendo, demanding that any refunds Nintendo gets back be passed along to shoppers.

“Nintendo has made no legally binding commitment to return tariff-related overcharges to the consumers who actually paid them,” the lawsuit says. “This lawsuit seeks to prevent that unjust result.” Nintendo has also sued the Trump administration over tariffs. Some companies have agreed to give tariff refunds to their customers. After the U. S.

Supreme Court struck down Trump’s tariffs in February, Dame, a sexual wellness company, prematurely refunded customers who paid its $5 “Trump Tariff Surcharge” last year. Also that month, Cards Against Humanity vowed to channel any tariff refunds back to its customers.

But the matter is more complicated than cutting customers a check, sources told Modern Retail. Compounded, the effects of tariffs can be double or even triple what brands ended up handing over to the government in the first place.

The apparel brand Wild Rye, for instance, paid $250,000 in recent tariffs, but the entire cost to its business was closer to $750,000, founder Cassie Abel told Modern Retail. When Liberation Day hit a year ago, Wild Rye temporarily paused all of its production. It raised prices on its existing products, and it canceled a trip to Asia with its product team.

At one point, money was so tight that Wild Rye started an equity crowdfunding campaign. Taking into account all of its costs, Wild Rye cannot afford to give money back to customers, Abel said. Instead, Wild Rye plans to use its tariff refund to purchase future inventory and invest in its overall growth.

“[The refund] would make a very meaningful difference in the trajectory of our business,” Abel said. Costs have also been high for Baby’s Brew, which ended up paying more than $50,000 in tariffs.

The company is now paying interest rates on credit lines it pulled down to pay for tariffs up front, since “there is no payment plan” for something like duties, Suk said. The tariffs also drew out the brand’s cash conversion cycle, because Baby’s Brew paid tariffs on three to four months of inventory at a time.

“I’m having to pay for those goods up front with a tariff, and then, if I were to sell them to, say, Target, Target’s not going to pay me back for another 60 days,” Suk said. “So I’m completely out of that cash for what could be six months.”

After the Supreme Court ruling in February, Baby’s Brew went back on a 10% price increase it carried out in response to tariffs. It’s choosing to pass savings onto its products, rather than give refunds to consumers. “Our tariff is currently at 10%, which is much more manageable,” Suk said. “But you’re seeing potential for another 50% tariff on China.

You’re just going, ‘Here we go again.'” Over the last week, Kyle Peacock, head of Peacock Tariff Consulting, has helped dozens of clients request refunds from the U. S. government. Some e-commerce