Will importers share their tariff refunds with customers in Minnesota?
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SX Decoys sells lifelike replicas of waterfowl that help hunters attract animals like ducks and geese. Scott Butz owns the Fargo-based company and said in the past few years, his business has navigated a lot of challenges.
The COVID-19 pandemic strangled supply chains, raising shipping costs. Recently, spikes in oil prices from the Iran War have done the same. And all the while, he’s been dealing with tariffs, or taxes on imports.
“We did have to do a little (price) increase, but the customers accepted it,” he said.
Butz is sympathetic to President Donald Trump’s tariff strategy, which aimed to incentivize domestic production, raise revenue and reduce the country’s trade deficit.
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“We're going to get our money back,” he said.
In February, the Supreme Court struck down some of the Trump Administration's tariffs, ruling that the International Emergency Economic Powers Act, or IEEPA, does not give the president the authority to impose tariffs.
Shortly afterward, companies that imported goods from overseas and paid those fees began filing for refunds.
But importers are not alone in bearing the costs of tariffs. It’s also the businesses and consumers downstream of them.
“The importer passes along the increase in price to, say, the wholesaler, who then passes it along to the retailer, who then passes it along to the consumer,” said Louis Johnston, an economics professor at the College of St. Benedict and St. John's University.
Johnston said the same kind of dynamic applies in business to business transactions.
But those downstream entities are not getting a refund check.
Shared refunds are ‘hard to imagine’
Allstar Construction replaces roofs and gutters throughout Minnesota and North Dakota.
The company uses imported materials like steel and aluminum, but they’re not the ones actually importing those materials from overseas because they buy from other U.S. businesses.
Allstar’s president, Adam Olson, said it has taken a while for tariff costs to trickle down to him.
His suppliers were working through older inventory of their materials that had not been subject to tariffs, he said, but prices have recently been spiking.
But even though some of the costs of tariffs are being passed down to him, Olson won’t be getting a refund.
“We're not the importer of record, so we're not the ones that are going to be able to apply,” he said. “The refunds are going to start upstream and then hopefully work its way down to the end user.”
But Johnston, the economics professor, is doubtful.
“We don't know for sure, but it's hard to imagine that companies are going to turn around and offer discounts to their customers just because they've now gotten a refund from the government,” he said. “It's possible, it's possible — but I just don't see it as very likely.”
Consumers at the end of the supply chain might also be stuck with some of these costs.
The Tax Foundation, a nonpartisan think tank, estimates that last year, tariffs amounted to a $1,000 tax increase per household.
“I don't really think that consumers should expect to see a lot of movements in the prices this year, in terms of the price actually going down,” said Alex Durante, a senior economist at the think tank.
Durante said most businesses will probably hold onto that money as they wait and see which tariffs stick around and what new ones pop up.
That may make Scott Butz at SX Decoys an outlier, since he’s planning to share the refund with his customers.
“I'm actually going to reward our customers with a big sale this summer,” he said.
But tariff uncertainty continues. Shortly after the Supreme Court struck down the IEEPA tariffs, Trump announced a temporary 10 percent global tariff. A U.S. trade court ruled against those tariffs last week, but that order was temporarily paused while the administration appeals.
So, Butz and other importers are not out of the woods just yet.
