Tariff refunds are expected to come in the second quarter: Barclays

By Joy Wiltermuth

The Trump administration's new replacement tariffs could result in a lower effective rate of 9.1%, according to a strategist at J.P. Morgan Asset Management

Tariff refunds could come in the second quarter, according to a new estimate from Barclays

Refunds resulting from the Supreme Court's historic ruling in February that invalidated many of President Donald Trump's 2025 tariffs are likely to come in the second quarter of this year, according to Barclays researchers.

At issue is an estimated $175 billion in tariff revenue collected under the International Emergency Economic Powers Act that needs to be returned, according to Samuel Earl, a rates strategist at Barclays.

The U.S. Court of International Trade on March 4 said the tariffs that were collected must be refunded. After that, U.S. Customs and Border Protection "said it is making all efforts to have a streamlined refund process ready for use in 45 days from March 6," Earl said in a Tuesday client note.

That "should expedite the process," Earl said, adding that he expects substantial refunds to emerge in the second quarter.

Costco (COST) CEO Ron Vachris said during the retail giant's March 5 earnings call that it wasn't yet clear what the refund process, "if any," will be. "In many cases, we didn't pass the full cost on to our members," he said, adding that any recovered charges would be passed along to members through lower prices and better values. Costco, FedEx (FDX) and Nintendo (JP:7974) are among the companies seeking refunds of the Trump tariffs.

FedEx said in a statement to MarketWatch that any refunds it receives would be sent to shippers and consumers who originally bore those charges. Nintendo of America declined to comment beyond its request for a refund.

While Earl said tariff refunds most likely would be paid through the U.S. government's issuance of shorter-term Treasury bills, he thinks the Federal Reserve will continue making "reserve management purchases" of U.S. debt to keep a lid on short-term funding rates.

With that in mind, Earl expects that net T-bill issuance will reach $875 billion this year but that the Fed will purchase about $500 billion of that total, leaving a "still manageable" $375 billion in new bills for private investors to digest.

The $30 trillion Treasury market has taken the Supreme Court's ruling against Trump in stride, despite expectations that it will increase the U.S. budget deficit, which was last pegged around $1.8 trillion.

Instead, all the focus has been on the spike in oil prices (CL00) since the Iran conflict in late February, and on inflation concerns that led the benchmark 10-year yield BX:TMUBMUSD10Y to spike to 4.22% on Wednesday, about 25 basis points above its one-year low set on Feb. 27, according to Dow Jones Market Data.

Trump's temporary 10% replacement tariffs - with that rate expected to soon increase to 15% - may help offset some of the lost revenues from the invalidated IEEPA tariffs.

Treasury Secretary Scott Bessent indicated that the hike was imminent and that broad tariff levels invalidated by the Supreme Court decision "would be restored, using other authorities, within five months," David Kelly, chief global strategist at J.P. Morgan Asset Management, said in emailed comments on Monday.

"We don't quite believe this so, instead of assuming a continued effective average tariff rate of 11% throughout the forecast period, we now expect an effective rate of 9.1%," he said.

Tomi Kilgore contributed.

-Joy Wiltermuth

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03-11-26 1408ET