March 9, 2026
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Should Costco Be Channeling Tariff Recoveries to Members?
Costco plans to pass on savings from tariff refunds to shoppers through lower prices if the warehouse retailer manages to land a windfall.
“As we’ve done in the past, when legal challenges have recovered charges passed on in some form to our members, our commitment will be to find the best way to return this value to our members through lower prices and better values,” CEO Ron Vachris said on a quarterly analyst call. “We’ll be transparent in how we plan to do this if and when we receive any refunds.”
Vachris cautioned that it’s “not yet clear what the process will be, what refunds, if any, will be received, and when this will happen.”
He added that Costco has absorbed some of the tariff impact. Vachris said, “Throughout the past year, we have taken action to reduce the impact of tariffs; in many cases, we did not pass the full cost on to our members.”
In its latest fiscal second quarter ended February 15, Costco lowered prices on eggs, cheese, coffee, and some paper products due to lower inflation for those goods. Vachris said, “At Costco, we always want to be the first to lower prices and the last to raise them.”
Costco and Other Retailers Mull What To Do if Tariff Refunds Materialize
A survey from KPMG of 300 U.S.-based c-suite and business leaders at organizations across sectors with annual revenues above $1 billion shared with Fortune’s CFO Daily and CFO Dive found only 18% would fully reverse price hikes resulting from Trump’s tariffs. Among the respondents, 34% would implement a partial rollback of price increases and 30% would use temporary promotional pricing.
If refunds arrive, the survey showed companies would most likely reinvest in supply chain diversification (14%), followed by working capital and inventory (13%), R&D/product innovation (12%), and capital expenditures (12%). Shareholder returns and customer credits/rebates ranked the lowest — at 5% and 4%, respectively.
The KPMG survey was taken between Feb. 9 to 24 while the U.S. Supreme Court’s ruling that many of Trump’s tariffs — those invoking the International Emergency Economic Powers Act (IEEPA) — were unconstitutional arrived on Feb. 20.
Matt Priest, president and CEO the Footwear Distributors and Retailers of America (FDRA), told SGBonline that he suspects some companies may use potential refunds to lower pricing in price-sensitive channels — but others may choose to make investments in new hires, technology, or facilities they’ve been putting off due to cost pressures from tariffs. He also noted there’s been “some dumbing down of product” to lower the FOB (freight on board) cost of imports, and that any tariff recovery could shift toward quality upgrades.
Priest said, “The companies will make their determination. Capitalism has a funny way of sorting all that out on behalf of the American consumer.”
BrainTrust
Tom Ryan
Managing Editor, RetailWire
Recent Discussions
Discussion Questions
Will Costco gain an advantage by committing to pass any tariff recoveries in the form of lower prices to consumers? Should other retailers follow suit?
How should firms be evaluating what to do with potential tariff refunds?
Poll
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Costco’s business is built on the principle that members pay a fee to access great value. As Costco mostly makes its profit from those fees, all actions are designed to protect renewals. That includes investing tariff refunds into lowering prices. Sure, Costco could keep the refund money as profit – just as it could charge more for its hotdog meal. It won’t because it doesn’t want to kill the membership goose that lays the golden eggs.
Costco has make a reputation as the only retailer so far committed to returning the tariffs via reduced pricing. This makes sense as they brought the lawsuit. Will other retailers want to bask in the glow of customer appreciation?
Costco’s commitment to pass tariff recoveries back to members in the form of lower prices is entirely consistent with the core philosophy of the wholesale club model. Having spent many years in the club channel, I can say that the format fundamentally operates as a buying agent for the member. The goal is not to maximize margin on each item or category, but to deliver the lowest possible cost structure to the member and earn the majority of profit through membership growth and renewal. In that context, returning tariff savings to shoppers reinforces the trust relationship that underpins the entire model. It sends a clear signal that Costco’s interests are aligned with the members’ wallets.
That approach may give Costco a competitive advantage, but it does not necessarily translate easily to other retail formats. Most traditional retailers operate on a margin-driven model, with merchandise profitability as the primary financial engine. For them, tariff refunds may be used to rebuild margins, fund promotions, or offset other cost pressures rather than flowing directly back into everyday prices. The key question each retailer must answer is whether the long-term value of lower prices and increased customer loyalty outweighs the near-term financial benefit of retaining those savings.
Ultimately, how companies handle potential tariff refunds should be evaluated through the lens of their operating model and customer value proposition. For a membership-driven format like Costco, passing savings through is a natural extension of its brand promise. For other retailers, the decision will likely be more nuanced—balancing price competitiveness, margin stability, and customer perception. But Costco’s move does highlight a broader lesson: when retailers consistently align their pricing actions with their stated philosophy, it tends to strengthen trust and loyalty with shoppers over time
Costco and all other retailers with the wherewithal to identify customer transactions impacted by the tariffs should make every effort to return to customers whatever they recover. It is the fair thing to do, and builds trust and loyalty.
This is why Costco has happy members. When you understand how they operate, it makes sense that they would find ways to channel tariff recoveries (or other ways to save money) back to their members. This is how they have retained and grown their membership.
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Costco’s business is built on the principle that members pay a fee to access great value. As Costco mostly makes its profit from those fees, all actions are designed to protect renewals. That includes investing tariff refunds into lowering prices. Sure, Costco could keep the refund money as profit – just as it could charge more for its hotdog meal. It won’t because it doesn’t want to kill the membership goose that lays the golden eggs.
Costco has make a reputation as the only retailer so far committed to returning the tariffs via reduced pricing. This makes sense as they brought the lawsuit. Will other retailers want to bask in the glow of customer appreciation?
Costco’s commitment to pass tariff recoveries back to members in the form of lower prices is entirely consistent with the core philosophy of the wholesale club model. Having spent many years in the club channel, I can say that the format fundamentally operates as a buying agent for the member. The goal is not to maximize margin on each item or category, but to deliver the lowest possible cost structure to the member and earn the majority of profit through membership growth and renewal. In that context, returning tariff savings to shoppers reinforces the trust relationship that underpins the entire model. It sends a clear signal that Costco’s interests are aligned with the members’ wallets.
That approach may give Costco a competitive advantage, but it does not necessarily translate easily to other retail formats. Most traditional retailers operate on a margin-driven model, with merchandise profitability as the primary financial engine. For them, tariff refunds may be used to rebuild margins, fund promotions, or offset other cost pressures rather than flowing directly back into everyday prices. The key question each retailer must answer is whether the long-term value of lower prices and increased customer loyalty outweighs the near-term financial benefit of retaining those savings.
Ultimately, how companies handle potential tariff refunds should be evaluated through the lens of their operating model and customer value proposition. For a membership-driven format like Costco, passing savings through is a natural extension of its brand promise. For other retailers, the decision will likely be more nuanced—balancing price competitiveness, margin stability, and customer perception. But Costco’s move does highlight a broader lesson: when retailers consistently align their pricing actions with their stated philosophy, it tends to strengthen trust and loyalty with shoppers over time
Costco and all other retailers with the wherewithal to identify customer transactions impacted by the tariffs should make every effort to return to customers whatever they recover. It is the fair thing to do, and builds trust and loyalty.
This is why Costco has happy members. When you understand how they operate, it makes sense that they would find ways to channel tariff recoveries (or other ways to save money) back to their members. This is how they have retained and grown their membership.