Costco’s secret tariff time bomb: Is this billion-dollar lawsuit about to shake the economy?

Synopsis Why Michael Burry thinks Tesla is overvalued. He says the company’s stock price is too high and may not match its real future growth. The piece looks at his warning, what it means for investors, and why he believes the market is ignoring important signs. It gives a clear, easy view of the issue. Costco has joined a fast-growing group of companies suing the Trump administration over global tariffs because they want to make sure they get refunds if the US Supreme Court later cancels the tariffs. Costco is one of the biggest companies in this fight, which until now was mostly led by small businesses and Democratic state officials. The Supreme Court heard arguments on Trump’s tariffs on Nov. 5, but the justices did not say when the final ruling will come, as reported by Bloomberg. Many companies are filing lawsuits early, because they want to avoid uncertainty about refunds if the court rules against the tariffs. Tariff refund fears grow Costco filed its lawsuit on Nov. 28 in the US Court of International Trade, saying they acted because it is unclear whether all businesses will actually get refunds if the tariffs are ruled unlawful. The lawsuit does not say how much the tariffs have cost Costco so far. Costco says it needs fast court action because Customs and Border Protection refused to extend the deadline for finalizing tariff calculations under the International Emergency Economic Powers Act. Costco argues this deadline problem could stop them from getting full refunds in the future, even if the Supreme Court strikes down the tariffs, as per the report by Bloomberg. Costco did not respond to reporter questions on Monday. White House spokesperson Kush Desai defended the tariffs, saying, “The economic consequences of the failure to uphold President Trump’s lawful tariffs are enormous and this suit highlights that fact.” Retailers hit by rising tariff costs In Supreme Court arguments, several justices seemed skeptical of Trump’s tariffs, which bring in tens of billions of dollars per month. Lower courts earlier ruled against the administration, but still allowed the tariffs to stay until the Supreme Court decides. Other big companies like Revlon and Kawasaki Motors have also filed tariff lawsuits recently. Live Events The fast-changing tariff policies have disrupted the retail sector this year, raising prices and hurting US consumer spending already affected by years of inflation. Some prices, like electronics and clothes, are higher than a year ago, even though negotiations and exemptions reduced some of the damage. Many big retailers have not filed lawsuits, which makes Costco an unusual case. Legal time bomb for Trump’s tariffs Costco says it is trying many strategies to reduce tariff damage, like shipping items to non-US markets, buying inventory early, cutting suppliers, and changing merchandise when items become too expensive. CFO Gary Millerchip said, “We’re doing everything we can… whether that’s working with the suppliers to find efficiencies to offset the impact of tariffs, or whether it’s sourcing with them often to different countries”, as stated by Bloomberg. Costco kept stable prices on pineapples and bananas, which are important to shoppers, but raised prices on flowers because they are not essential. Costco says its small product assortment helps it handle tariffs better, since it carries only a few thousand items while other big-box stores carry over 100,000. Still, Costco executives say it is hard to predict future prices under shifting tariff rules. The formal case name is Costco Wholesale Corp. v. Customs and Border Protection. Tariff refund risk explained Mario Nawfal posted on X that Costco’s lawsuit could trigger “economic chaos” because it challenges the legal foundation of Trump’s tariff policy. He said this isn’t about whether tariffs are good or bad, but about a legal “time bomb” where the government might be forced to refund hundreds of billions in tariffs already collected. Companies like Costco are filing early because of a little-known customs rule called “liquidation”, which finalizes tariff calculations and can block refunds forever. There is a December 15 deadline, after which many tariff payments could become locked and non-refundable. Nawfal says sourcing multiple news reports, this situation is unprecedented, because companies never file refund lawsuits before a Supreme Court ruling — but now they fear losing refund rights. If Costco gets even small legal relief, Nawfal says “every retailer and importer” could start suing, creating a huge wave of cases. Tariffs are central to Trump’s economic strategy, generating tens of billions per month, and he has even talked about replacing federal income tax with tariffs. Costco lawsuit impact on economy If the Supreme Court rules against Trump, Nawfal warns the government may have to refund all past tariffs—money that has already been spent—creating a gigantic budget crisis. He says this could shock the bond market, raise interest rates, and create chaos on Wall Street. Nawfal notes that several justices appeared skeptical of Trump’s legal authority, meaning the administration might lose the case. More companies are filing lawsuits every day, adding pressure and increasing the possible refund amount. Nawfal says Costco filed because the uncertainty has become too risky, even though Costco has worked hard to handle tariffs through rerouting, buying early, and supplier consolidation. He says this is not political drama—this is corporate survival, because major firms don’t want to lose billions due to procedural deadlines. Nawfal concludes that if tariffs fall, it could be one of the biggest economic policy reversals in modern US history, with huge effects on government revenue and markets. He says the Costco lawsuit is basically a stress test of whether Trump’s tariff strategy can survive legally, and companies are preparing in case it does not. FAQs Q1. Why did Michael Burry say Tesla is overvalued? He said Tesla’s stock price is far higher than its real business performance and future demand justify. Q2. What is Michael Burry warning Tesla investors about? He warned that Tesla could face a big correction because the company may not meet the high growth expectations. (You can now subscribe to our Economic Times WhatsApp channel) (Catch all the US News, UK News, Canada News, International Breaking News Events, and Latest News Updates on The Economic Times.) Download The Economic Times News App to get Daily International News Updates. ...moreless (You can now subscribe to our Economic Times WhatsApp channel) (Catch all the US News, UK News, Canada News, International Breaking News Events, and Latest News Updates on The Economic Times.) Download The Economic Times News App to get Daily International News Updates. ...moreless Explore More Stories Amazon warns over 300 million users of major Black Friday impersonation scams targeting personal data What is Canada’s new colour-coded alert system and how it will ensure public safety during extreme weather Canada launches new alert system for extreme weather; Colour-coded system marks shift to impact-based forecasting Canadian Olympic swimming champion Penny Oleksiak suspended for two years over anti-doping whereabouts failures Who is Colleen Jones? Two-time World champion curler and veteran Canadian broadcaster dies at 65 What exactly is the Canada Pension Plan? 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