Tariff Refunds Are Flowing, and Only 15% of Firms Plan to Cut Prices

Tariff Refunds Are Flowing, and Only 15% of Firms Plan to Cut Prices

Asked what they will do with their tariff refunds, 75.2% of US firms said they would keep the cash, 52.5% said they would put it into R&D or capital projects, 17.2% planned customer rebates and just 14.8% planned to lower prices.

The path the money takes explains the answer. Tariffs are paid to customs by the importer, the cost travels down the supply chain into the shelf price, and the consumer ends up paying it. The refund goes back to the importer who wrote the cheque, not to the person who absorbed the cost. Prices move up as a whole chain, and nothing obliges them to move back down, so the tariff lands in the price level while the refund lands on a balance sheet.

The sums are not small. After the Supreme Court ruled $166 billion of emergency tariffs unlawful, refunds began flowing in May, and about $134.7 billion had been paid or accepted for processing by 11 September. That averages 1.7% of annual revenue for the firms surveyed. It is one-off cash, though, and the survey asked about intentions rather than actions, so what firms actually do may differ.

Source: Atlanta Fed Survey of Business Uncertainty and Bloomberg (Image: @puckrin)