Several large U.S. importers are about to get some major refunds, which should be good news for their shareholders.
Imposing tariffs on U.S. trade partners was a signature economic policy of President Trump's first year in power. But in February, in a momentous decision, the Supreme Court rejected the administration's argument that the International Emergency Economic Powers Act authorizes the White House to impose tariffs.
A major consequence of that decision was that the federal government must refund the $166 billion or so it collected from tariffs.
The question now is, which stocks will benefit the most from those refunds?
Because importers paid the tariffs, companies that rely heavily on foreign goods stand to receive the largest refunds. That essentially means blue chip retailers.
Walmart leads the pack on expected refunds
So it's no surprise that Walmart (WMT 0.12%) -- the largest U.S. retailer , which relies on imports for about a third of its merchandise -- will benefit the most.
NASDAQ: WMT
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According to an April 10 report by Citi, Walmart's refund from the Trump tariffs will be about $10.2 billion. That's not an insignificant figure, though it's relatively modest compared to the company's revenue, which was about $713 billion last year.
Another giant retailer, Target (TGT +0.07%), is second on the refund list. Citi estimates its refund at $2.2 billion. The company imports about half of its merchandise.
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Next on the list, with an estimated $1 billion refund, is Nike (NKE 1.84%). The footwear and clothing behemoth sources the vast majority of its footwear in Asia, particularly Vietnam, Indonesia, and China.
NYSE: NKE
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Kohl's (KSS 5.60%) will get back $550 million from the tariffs it paid. Home improvement chain Home Depot (HD 2.40%) will see a similar amount – Citi estimates it at $540 million.
Gap (GAP 0.86%) is due about $400 million, and Macy's (M 0.72%) will get $320 million back.
In all, there were more than 330,000 importers that paid duties on Trump's tariffs.
Image source: Getty Images.
For companies that paid major tariffs over the past year, refunds could provide a one-time boost to revenue and earnings in the coming quarters.
Yet it may take the government a while to process those refunds. Earlier this month, Walmart CFO John David Rainey said the company doesn't expect the refunds to happen quickly, as the process may be cumbersome. He also noted that any refund Walmart gets would be recognized as earnings from an accounting standpoint. The company reported adjusted operating income of about $8.7 in its fiscal fourth quarter, so a $10 billion refund is certainly significant compared to earnings.
While the refunds are good news for these companies and their shareholders, there remains the thorny fact that many of these retailers passed the tariff cost increases on to customers via higher prices. So, some of them may face lawsuits from customers seeking to recover those funds.
And President Trump has not given up on tariffs, despite the Supreme Court decision. The White House has said it will seek to establish new tariffs under different laws that might pass muster under court rulings.
