The U.S. Customs and Border Protection issued $49.2 billion in refunds in June, according to the U.S. Treasury's monthly statement, bringing total tariff refunds to about $71 billion, or more than 60% of the $166 billion available following the Supreme Court striking down tariffs under the International Emergency Economic Powers Act (IEEPA) in February.
But as companies recoup costs associated with the import taxes they were forced to pay last year, they're finding that, in many cases, those funds are being eaten up thanks to the impact of other economic pressures.
"We do expect some more pressure on the business from a commodity standpoint," PepsiCo Chief Financial Officer Steve Schmitt said in the company's earnings call last week. "We will be using the tariff, essentially the refunds, to help offset some commodity inflation that we're seeing and allow us to continue to play offense in the business."
The company's CEO Ramon Laguarta said the Iran war and its impact on gas prices in particular have impacted consumer behavior, reducing discretionary spending and trips to convenience stores, which is correlated with purchases.
Marcos Gabriel, CFO of spice brand McCormick & Company, noted during an earnings presentation last month that its $31 million in tariff refunds will counterbalance higher costs. The company raised prices twice in the last year as a result of tariffs and limited freight capacity.
"I think it's important to note that the Middle East conflict is really driving more inflation that we had not contemplated before…so we are going to use the majority of the tariff refund to offset these higher costs," Gabriel said.
Economic impacts of geopolitical tensions
Economists have long concluded that Trump's tariff policy was inflationary, with Goldman Sachs warning that despite IEEPA tariffs being struck down, prices will continue to be elevated in part as a result of continued levies imposed through Sections 122, 232, and 301 of the 1974 Trade Act.
But even as companies adjust supply chains and margins to account for increased tariff costs, they are finding headwinds elsewhere. While wholesale inflation fell last month as energy prices fell, Trump's renewed attacks on Iran and reignited standoff at the Strait of Hormuz has analysts concerned prices could once again increase. Goldman Sachs's chief U.S. economist David Mericle warned that if oil spikes above $100 per barrel as it did earlier in the conflict, monthly core inflation could increase by 3 to 4 basis points in the coming months.
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