Deciding what to do with the billions of dollars in refunds on invalidated Trump tariffs flowing back into company coffers would seem like the corporate version of a champagne problem.
Yet the newfound cash still requires the C-suite to carefully consider implications their chosen strategy can have across finance, accounting, customer loyalty and legal standing. Indeed, many companies nationwide are already fending off proposed class action lawsuits on tariff refunds.
To get a better sense of how finance executives are thinking about this, CFO Dive asked readers via an informal LinkedIn poll to vote for what they see as the best tariff refund strategy for their company.
Lowering prices was the most popular option, drawing nearly half (46%) of the 13 responses, which came largely from CPAs and finance executives. Lowered prices were followed by refunding the money directly to vendors or customers (30%), while investing back in the company came in at 15% and compensating employees was just 7% of votes.
The focus on pricing was notable to Terence Lau, dean of the Syracuse University College of Law, because that could be considered the most risky when it comes to legal consequences such a move could carry. “Lowering prices feels like the responsible middle course, but legally it actually adds risk without reducing any,” Lau told CFO Dive in an email.
Not only does it not resolve the claim of the customer who has overpaid, as it benefits a different person who may not have purchased the higher-priced goods, he said if lowered prices are marketed as the company saying it will pass tariff savings back, that raises questions under state consumer protection laws. In addition, it introduces antitrust considerations.
Of the four, the option that carries the least legal risk would be reinvesting refunds in the company, because Lau said that move creates no new promises, counterparties and no new claims and the decision to retain it is protected by the business judgement rule. Under the rule, a court will uphold a director's decision so long as it is effectively made in good faith and in the best interest of the corporation, according to the Cornell Law School Legal Information Institute.
But he noted that companies don’t always have options. If they separately itemized a tariff surcharge, they need to refund it, if their contracts with vendors require sharing, they must share; while if the cost was embedded in prices, they have discretion. The prudent answer to the poll is to “work out which of the four you actually have a choice about,” Lau said.
To be sure, CFOs have detailed different tariff strategies in recent earnings calls. Walmart CFO John David Rainey explained the company’s plans to invest the funds in “price leadership,” while Amazon CFO Brian Olsavsky described a combination approach including outright refunds when tariff costs are identifiable. Apple CEO Tim Cook said earlier this year that funds would be partly directed to U.S. innovation and manufacturing, CFO Dive previously reported.
Shikha Jain, lead partner for the consumer sector North America at global consulting firm Simon-Kucher, said retailers and other companies who do have choice are often putting the money toward the issue that aligns with their company’s values. For example, Walmart is focused on keeping down prices, while Apple is more focused on developing its products.
As for when or how businesses lowering prices will do so, Jain said she would expect that tariff refunds could be behind some better pricing offered up in Black Friday deals. Still, she does not expect companies to promote any pricing deals as a tariff refund sale because it is too complicated and could raise more questions.
“What if people start asking you for the math, can you do the math?” Jain said in an interview. “ That’s the hard part.”
