Costco Sues Government, Escalating Tariff Strife

Costco is suing the U.S. government over the issue of tariffs, marking an escalation in the ongoing struggle between the Trump administration and several American businesses. Why is Costco suing, and what does this mean for the future of the tariff policies?

Costco Suing Federal Government to Recoup Tariff Costs

Costco is acting preemptively ahead of a U.S. Supreme Court ruling regarding the legality of President Donald Trump's tariffs. The retail giant based in Issaquah, Washington, joined several other companies in suing the government to ensure potential refunds should the highest court in the land rule that the tariffs are unlawful.

The complaint was filed on Friday in the U.S. Court of International Trade in Manhattan, New York. Costco is arguing that the president's use of the International Emergency Economic Powers Act (IEEPA) to impose the tariffs leaves uncertainty about whether businesses will be able to recoup the money that should not have been paid.

Dozens of companies have filed similar lawsuits in an effort to safeguard potential refunds should the Supreme Court rule against Trump's tariffs. The country's most prolific warehouse club is among the largest of these companies, reporting $275.2 billion of revenue in the fiscal year ending August 31.

Costco said that U.S. Customs and Border Protection (CBP) denied its request for more time to process the final calculations of the tariffs that it owes. This would effectively jeopardize Costco's right to receive tariff refunds if the court rules against the Trump administration.

According to court records, other companies that have taken similar preemptive action to guard their potential refunds include Revlon, Kawasaki Motors, Yokohama Tire, Bumble Bee Foods, and Ray-Ban eyeglass maker EssilorLuxottica.

Latest on the Supreme Court Case

The legality of Trump's tariffs is still making its way through the nation's court system. The Supreme Court heard oral arguments on November 5 regarding the limits of the executive power. Records show that justices on both sides of the court's political ideology asked questions about whether the president was within his legal right to use the 1977 emergency powers to enact the tariffs. While the justices agreed to take the case on an accelerated timeline, they did not indicate when they will issue a ruling.

During the November hearing, the court heard arguments over the specific "Liberation Day" tariffs Trump imposed on the international business community, in addition to the other tariffs he enacted under the IEEPA. The IEEPA gives U.S. presidents the authority to regulate the nation's imports during times of emergency. The Trump administration argued that this act encompasses the ability to levy taxes on imported goods. Critics of Trump note that no previous president has ever tried to use the power of IEEPA.

Solicitor General D. John Sauer represented the Trump administration during the November hearing. Most of the nine justices asked Sauer questions about why the president should be able to exercise this power. For example, Trump-appointed Justices Neil Gorsuch and Amy Coney Barrett questioned the administration's arguments that the IEEPA granted this power surrounding tariffs. Barrett went one step further, pressing Sauer to show any time in American history where the executive's right to "regulate importation" translated to the power to enact tariffs to this degree.

The stakes are high for the Trump administration and its overall economic policies. The White House has used tariffs as a powerful weapon when negotiating trade deals on a global scale. Should the Supreme Court rule against Trump, the administration will likely lean on other laws to push through its tariff agenda.

On its end, Costco said that it has enacted multiple strategies to keep prices in check and not pass the increased cost onto its members. These strategies include reducing the number of supplies that it uses and leaning more into local sourcing to avoid having to pay the tariffs. The company also said that it is relying more on its popular in-house Kirkland brand to round out its offerings.

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