Walmart spent much of the past year warning that President Donald Trump's now struck-down Liberation Day tariffs would raise prices on store shelves. Now nearly $3 billion of that money is flowing back to the retail giant, and the company says it will use the windfall to lower prices as consumers feel the pain in their pockets.

Walmart was eligible for $2.9 billion in tariff refunds after the Supreme Court ruled the tariffs were unlawfully imposed under Trump's emergency powers — the International Emergency Economic Powers Act — with the refunds equal to approximately half a percent of its annual U.S. sales. Because duties are paid by importers at the border and returned to them after such rulings, the money flows directly back to companies like Walmart — the largest U.S. retailer by revenue, the country's biggest private employer, and one of its largest importers of containerized goods. CFO John David Rainey said on Walmart's earnings call Thursday that the company has now received "substantially all" of that money and will reinvest it into lowering prices "because customers need us to." Walmart shares rose as much as 9% in Thursday trading after U.S. sales growth hit a six-year low.

"We've taken a disciplined approach to investing these funds back into customer experience and price leadership, prioritizing investment in grocery and general merchandise categories," Rainey told analysts on the call.

The retailer now has more than 11,000 items on "rollback" — its term for temporary price reductions — up from roughly 7,200 at the end of the previous quarter. Walmart CEO John Furner said that was the highest number he could remember "at least in recent times." The money has gone toward discounts, most notably on ground beef, where Furner said higher prices were hurting customers. Walmart previously passed tariff-related costs on to consumers, with prices for products like electronics and appliances rising more than 3%, up from 1.7% before the tariffs.

"Ultimately, we're trying to reinforce the everyday low-price model and save customers money," Furner said. The stakes reach beyond Walmart's own aisles: as the largest U.S. grocer, its pricing decisions are widely watched as a bellwether for the broader consumer economy.

Research indicates shoppers also bore much of the tariffs' cost on top of inflation. Dallas Fed researchers estimated core inflation would have been 0.8 percentage points lower in March if the tariffs had not been imposed, while separate research from the Kiel Institute estimated that Americans paid for 96% of the costs of the tariffs.

Gas prices squeezed Walmart customers as fewer people shopped

The push to lower prices comes as Walmart said its customers are feeling more strained because of gas prices, echoing warnings executives have repeated since May.

Rainey told analysts the pressure became more noticeable in June, as gas rose above $4 a gallon and shoppers began making more tradeoffs in what they bought. The company now expects more than $2 billion in additional fuel-related costs this year compared with what it anticipated when it issued its original forecast.

Fewer people also shopped at Walmart as the K-shaped economy kept high-income buyers spending while pushing out lower-income ones, with Walmart's biggest gains in market share coming from households making over $100,000.

Walmart's U.S. sales rose 2.6% in its latest quarter, below analysts' expectations of 3.8%, the retailer's first comparable-sales miss in more than five years. Customer traffic grew 1.5%, down from 3% the previous quarter, as higher fuel prices put more pressure on consumers. Rainey previously warned in May that shoppers filled their gas tanks with fewer than 10 gallons on average for the first time since 2022, calling it an "indicator of stress."

Walmart said sales in its core categories outside health and wellness have remained in the 3% to 4% range, while global e-commerce sales rose 23%. The company also raised its full-year sales outlook to growth of 4% to 5%, from 3.5% to 4.5% previously, citing first-half performance and expectations that its price investments will drive stronger sales and market-share gains. That raised outlook now leans on those price investments: whether the rollback count holds above 11,000 into the holiday quarter, and whether refund-funded discounts spread beyond grocery and general merchandise, are among the questions executives will face on coming earnings calls as the roughly $2.9 billion is fully put to work.

Source: Fortune