US Retail Tariff Refunds Boost Target's Profits
Target, an American retail giant, has received a $994 million pre-tax reimbursement from the US government in the form of tariff refunds. This reimbursement has significantly boosted the retailer's latest profits, with its second quarter operating income doubling to $2.6 billion from $1.3 billion last year.
The reimbursement is a result of a Supreme Court ruling that declared a wave of President Donald Trump's import tariffs unlawful. However, Trump has continued to impose duties on goods coming into the US through different legal means, meaning many companies still face extra taxes.
Target is not the only company to receive tariff refunds. Earlier this month, a court filing by customs officials revealed that the Trump administration had paid back $100 billion in "Liberation Day" tariff refunds to businesses, representing about 60% of all tariff revenue collected by the government under the policy.
The company plans to use the tariff refunds to invest in price, according to its chief financial officer Jim Lee. Target has been working on a turnaround plan, which includes cutting prices on over 10,000 items and reducing its reliance on China for sourcing products.
| Tariff Refunds | Target | Estee Lauder |
|---|---|---|
| Amount | $994 million | $38 million |
| Pre-tax reimbursement | ||
| Impact on profits | Doubled to $2.6 billion | Partially offset full-year gross impact of incremental tariffs |
Separately, US cosmetics giant Estee Lauder has also benefited from tariff refunds, recording a "$38m benefit in the cost of sales" in its latest quarterly results. This partially offset the full-year gross impact of incremental tariffs of $102 million, which was primarily recorded in cost of sales.
Shares of Estee Lauder saw its share price jump about 17% after its results exceeded expectations.
Target's chief executive Michael Fiddelke said the company is making progress in its turnaround plan and remains focused on executing with discipline. The company has said it would aim to reduce its reliance on China for sourcing products, with 30% of its store-label goods currently sourced from the country.
The company's big sellers are mostly in non-essential goods, such as home furniture and beauty products. It sources the majority of such products from China, with 30% of its store-label goods from the country. It was previously higher at 60% in 2017.
The president has used and threatened tariffs on dozens of countries since he returned to the White House last year. He has argued the trade policy will boost American manufacturing and jobs as businesses either source goods domestically or shift operations to the US.
But economists have warned prices for consumers can rise as businesses, which pay the tax when importing goods, pass on the extra cost to customers.
The president announced on Tuesday he would delay the introduction of a raft of new import taxes on various Canadian goods for three days as negotiations over a trade deal continue. Trump has threatened to impose 50% levy on nearly $20 billion worth of imports from Canada. The two sides have been at an impasse on several issues, including US tariffs on autos, and many Canadian provinces banning American liquor sales.
