New 50% U.S. tariffs on $20 billion of Canadian goods took effect Aug. 22, expanding import costs across products ranging from cement and plywood to furniture and other goods sold through distribution.

The Trump administration imposed the duties under Section 338 of the Tariff Act of 1930, opening another front in a trade dispute with Canada while distributors continue to adjust pricing and purchasing strategies to a U.S. tariff system that has changed repeatedly this year.

President Donald Trump signed three proclamations July 20 targeting Canadian dairy products, alcoholic beverages, and motor vehicles over trade practices the administration considers discriminatory.

The tariffs were initially scheduled to take effect Aug. 19 but were delayed three days while U.S. and Canadian officials continued negotiations. The talks ended without an agreement, and U.S. Trade Representative Jamieson Greer said no additional discussions were planned.

Canadian Prime Minister Mark Carney said Canada would retaliate “dollar for dollar.”

The affected products extend well beyond the categories highlighted by the administration. Annexes to the proclamations include cement, plywood, furniture, wine, clothing, seeds, fishing rods, hockey sticks, and swimming pools, among hundreds of tariff classifications.

The duties apply even to products that qualify for preferential treatment under the United States-Mexico-Canada Agreement, eliminating an exemption that had shielded many Canadian products from previous U.S. tariffs.

Canada responded with tariffs on U.S. products including steel, dairy products, appliances, agricultural machinery, paper, and electronics.

U.S. Tariff Policy Continues to Shift

The Canadian tariffs are the latest change in a U.S. trade policy that has been reshaped several times in 2026 by court decisions and new administration actions.

The U.S. Supreme Court ruled 6-3 on Feb. 20 that the International Emergency Economic Powers Act did not give the president authority to impose tariffs, invalidating duties imposed under the law. Those included the administration’s 2025 reciprocal tariffs and fentanyl-related tariffs on Canada, Mexico, and China.

U.S. Customs and Border Protection stopped collecting the affected duties following the decision. A process for refunding previously collected tariffs is underway, although the government has not completed procedures for returning all the money.

The administration responded by invoking Section 122 of the Trade Act of 1974, which permits temporary import surcharges of up to 15% for no more than 150 days under certain balance-of-payments conditions.

A 10% global surcharge took effect Feb. 24.

The U.S. Court of International Trade ruled against the surcharge in May. The administration appealed, and the U.S. Court of Appeals for the Federal Circuit stayed the decision June 11, allowing collection to continue during the appeal.

The Section 122 surcharge expired July 24. The U.S. Trade Representative then imposed tariffs of 10% to 12.5% on imports from about 60 trading partners under Section 301, citing forced-labor enforcement.

Twenty-five states sued Aug. 3 in the Court of International Trade seeking to block those tariffs and recover duties already collected.

Section 232 national security tariffs have remained on a separate track. Steel and aluminum duties were increased from 25% to 50% in 2025 and subsequently expanded to additional derivative products.

The administration completed a Section 232 investigation into polysilicon on Aug. 6, resulting in a 15% tariff and minimum import prices on the material used in semiconductor and solar manufacturing. A Section 201 tariff on quartz surface products took effect July 31.

A separate Section 301 investigation into structural manufacturing overcapacity covering 16 countries remains open. Brazil has faced a 25% Section 301 tariff since July 22.

For distributors, the result is a patchwork of tariffs imposed under different laws, covering different countries and products and carrying different expiration dates and legal risks.

Public Distributors Turn to Pricing

Second-quarter earnings reports provide a clearer picture of how distributors are responding to those costs.

W.W. Grainger reported $43 million in refunds related to invalidated IEEPA tariffs during the second quarter, adding about 90 basis points to gross margin.

CEO D.G. Macpherson said the refunds were smaller than the cumulative tariff-related cost increases Grainger had absorbed and said the company does not expect refunds of similar magnitude going forward.

Grainger adjusted prices during the quarter as tariff policy changed and is planning another pricing action in September. The company expects the increase to add about 1% to annual revenue and help offset freight and tariff-related costs.

Third-quarter operating margin is expected to decline sequentially as the tariff-refund benefit does not repeat.

Fastenal executives also said tariff-related costs pressured gross margin during the first half of the year. Pricing actions have helped offset those increases and broader inflation, with the company continuing to target price-cost neutrality rather than using tariff-related increases to expand margins.

Watsco has seen a similar shift.

Chairman Albert Nahmad cited tariffs alongside the pandemic, supply chain disruptions and regulatory changes as challenges the HVAC distributor has managed during the past five years.

Executive Vice President Barry Logan said aggressive manufacturer price increases in 2025 reflected the unusual combination of tariffs and inflation and should not be considered a new pricing baseline. He said that pricing behavior in 2026 has moved closer to historical patterns, he said.

Ferguson executives said the distributor has not received tariff refunds from branded suppliers and does not expect to receive them. Ferguson is the importer of record for only a small portion of its own-brand products, limiting its direct exposure to potential refunds.

Core & Main is seeing tariff effects primarily through product pricing rather than direct import costs.

CEO Mark Witkowski said the company remains cautious about private construction because of geopolitical and tariff uncertainty, interest rates, and builder confidence.

Chief Financial Officer Robyn Bradbury said PVC pipe prices had declined about 15% during the year, although recent supplier increases could provide modest revenue benefit during the second half of fiscal 2026.

The distributor also reported higher steel prices in its fire protection business, which Witkowski attributed in part to tariff-related costs moving through the supply chain.

WESCO International said its direct tariff exposure remains limited because it is the importer of record for only a low-single-digit percentage of its cost of goods sold. The company does not expect significant recoveries through the IEEPA refund process.

WESCO said it adjusts prices to maintain margins as tariff-related costs increase. Executives said indirect effects, including transportation costs, have been more noticeable but remain manageable.

Applied Industrial Technologies reported a pricing contribution of about 2% to 2.5% from tariff-related supplier increases during fiscal 2026. The company expects that contribution to moderate to about 1.5% to 2% during fiscal 2027.

CEO Neil Schrimsher said trade policy and geopolitical conditions could affect industrial production and customer spending. Chief Financial Officer David Wells said tariff conditions were stabilizing, heading into the new fiscal year.

Across the seven distributors, the response has been broadly consistent: Companies are passing on higher costs through pricing while not counting on tariff refunds or making significant changes to their sourcing networks.

Canadian Tariffs Add to 2027 Planning

The new Canadian duties add another cost variable as distributors begin planning purchasing, inventory, and pricing for 2027.

Section 338 allows tariffs of up to 50%, meaning the administration has already reached the statute’s maximum rate on the affected Canadian products. How long those duties remain in place could depend on whether Washington and Ottawa resume negotiations.

For distributors importing affected Canadian building materials and industrial products, the more immediate issue is how quickly higher landed costs move through inventories and into customer prices.

Recent results from major public distributors suggest the industry’s response is becoming increasingly consistent: recover tariff-related costs through pricing rather than wait for trade negotiations, court decisions, or refunds to provide relief.

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Wholesale distributors are once again reassessing pricing, sourcing and inventory strategies as the Trump administration advances new tariff proposals affecting pharmaceuticals, Canadian imports and other products while leaving key questions about future trade policy unresolved.

The latest developments include proposed tariffs of up to 200% on imported generic pharmaceuticals, new 50% tariffs on many Canadian imports and uncertainty over what will replace a temporary 10% global tariff scheduled to expire this week. Even where tariffs have not taken effect, distributors are making fourth quarter purchasing decisions without knowing what their future import costs will be.

For distributors, the uncertainty is becoming a business issue independent of the tariffs themselves. Companies are finalizing fourth-quarter inventory purchases, negotiating supplier contracts, and setting customer pricing without knowing where trade policy will settle. That makes it more difficult to determine how much inventory to buy, when to pass through higher costs and how much working capital to commit ahead of year-end.

The administration this week proposed tariffs of up to 200% on imported generic pharmaceuticals. Under the proposal, generic drugs would remain tariff-free until August 2028, followed by a 100% tariff for one year before increasing to 200%. Administration officials said the phased approach is intended to encourage manufacturers to move production to the United States.

For healthcare distributors, the proposal raises questions about product availability, sourcing, and future pricing.

Companies including Cardinal Health, McKesson, Cencora and Medline rely on global supply chains for many generic medications. While the delayed implementation provides time to renegotiate supply agreements and diversify sourcing, industry groups say rebuilding U.S. manufacturing capacity will take longer. That means distributors could remain dependent on imported products even after the tariffs begin taking effect.

The proposal also has implications for hospitals, health systems and group purchasing organizations, many of which operate under multiyear purchasing contracts. Distributors will need to revisit pricing provisions and cost-sharing arrangements well before the tariffs are implemented.

The administration has also announced 50% tariffs on many Canadian imports under Section 338 of the Tariff Act of 1930. The tariffs are scheduled to take effect Aug. 19, although many products that qualify under the U.S.-Mexico-Canada Agreement remain exempt.

The action affects distributors serving manufacturing, construction and infrastructure markets that rely on Canadian suppliers for steel products, fabricated metal components, chemicals, and building materials.

Before the tariffs take effect, distributors will need to determine which products qualify for USMCA exemptions and which do not. That review could require companies to audit certificates of origin, product classifications and supplier documentation across thousands of SKUs while preparing contingency plans if trade rules change again.

For many distributors, the most immediate impact will be on pricing.

Manufacturers often issue price-increase notices shortly after tariff announcements, leaving distributors to decide whether to absorb higher costs, negotiate with suppliers or pass increases on to customers.

Those decisions become more difficult for distributors serving customers under annual or multi-year contracts where pricing has already been established. Companies with dynamic pricing systems can often respond quickly to supplier cost increases. Those relying on quarterly price books or manual updates face a greater risk of margin erosion while waiting to adjust customer pricing.

Distributors with fixed-price contracts face an additional challenge. Companies without tariff pass-through provisions may have to absorb higher costs until agreements can be renegotiated, increasing pressure on margins.

Several distributors addressed tariffs during recent second-quarter earnings calls, suggesting the issue is already affecting pricing and customer purchasing decisions.

Fastenal executives said pricing actions have helped offset tariffs and other inflationary pressures, although the company continues to work through higher costs. Management also noted that ongoing trade uncertainty is influencing customer purchasing decisions.

MSC Industrial Direct said it implemented additional pricing in May to offset tariff-related cost increases in metalworking and other product categories and expects pricing gains to moderate later this year as comparisons normalize.

Genuine Parts Co. said it intends to pass through tariff-related supplier cost increases where possible and expects tariffs to account for half of its projected pricing increases this year.

Taken together, the comments suggest distributors are relying on pricing to protect margins while customers remain cautious about committing to future purchases.

Industrial distributors are likely to feel the broadest effects because they source products across multiple industries and countries.

Electrical distributors remain exposed to imported wire, switchgear, transformers, and electrical components. Plumbing and PVF distributors continue monitoring valves, fittings, pumps, and castings, while HVAC distributors face potential increases on compressors, motors, controls, and sheet metal products sourced through global supply chains.

Construction equipment distributors also could see higher costs for imported machinery, replacement parts, and fabricated steel components.

The impact will vary depending on each distributor’s supplier mix, inventory position, and ability to shift sourcing to domestic manufacturers or alternative countries.

The latest tariff proposals are also renewing attention on inventory management.

Many distributors have spent the past several years diversifying suppliers after pandemic-era shortages exposed to weaknesses in global supply chains. Those investments may now provide greater flexibility as companies evaluate alternative sourcing options.

Some distributors may choose to build inventory ahead of potential tariff deadlines, while others may avoid tying up working capital until trade policy becomes clearer. The decision will depend on product availability, supplier relationships, and the likelihood that additional tariffs will take effect.

The best positioned distributors heading into the fourth quarter are likely to be those with diversified supplier networks, strong inventory visibility and pricing systems that can respond quickly to changing costs. For many companies, inventory is becoming less a purchasing decision than a risk management strategy.

Another question facing distributors is what happens after the expiration of the temporary 10% global tariff imposed earlier this year.

The tariff is scheduled to expire this week, but the administration has not announced what, if anything, will replace it. That leaves distributors entering the second half of 2026 without a clear picture of future import costs.

After navigating pandemic disruptions, inflation and repeated shifts in trade policy, many distributors have become more disciplined about diversifying suppliers, improving pricing systems and strengthening inventory visibility. The latest tariff proposals suggest those capabilities are becoming long-term competitive rather than temporary responses to supply chain disruption.

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The U.S. Department of Labor has cited heavy-duty truck and trailer parts distributor FleetPride Inc. for 19 workplace safety violations following an investigation into the death of an employee at its Corpus Christi, Texas, facility.

The Occupational Safety and Health Administration (OSHA) opened its investigation on Jan. 7 after a 63-year-old employee died from asphyxiation while inspecting a tanker trailer.

Following the investigation, OSHA cited FleetPride for 16 serious violations and three other-than-serious violations, proposing $264,380 in penalties, according to an agency news release.

The agency said the violations included failing to implement a confined-space entry program, deficiencies in the company’s respiratory protection program and exposing employees to electrical hazards.

FleetPride has 15 business days from receiving the citations to correct the violations, request an informal conference with OSHA or contest the findings before the independent Occupational Safety and Health Review Commission.

The case involves one of the nation’s largest distributors of heavy-duty truck and trailer parts, where technicians routinely inspect and repair equipment that requires entry into tankers, trailers, and other confined spaces.

The investigation underscores OSHA’s continued focus on confined-space safety, respiratory protection and hazardous energy controls in service and maintenance operations. Those requirements remain among the agency’s most frequently cited standards in industrial workplaces where employees perform inspections and repairs inside enclosed equipment.

In a statement, FleetPride said the death of the employee earlier this year was “a profound tragedy” and that the safety and well-being of its employees remains its top priority. The company said it immediately suspended all tank-entry work nationwide following the incident and has not resumed those operations. FleetPride said it is reviewing OSHA’s citations, has requested an informal settlement conference and is committed to working with the agency to resolve the matter.

For distributors, the citations emphasize the need to ensure safety programs are consistently implemented across every service location, not simply documented in corporate policies. OSHA’s findings suggest the agency identified multiple deficiencies involving training, procedures, and hazard controls rather than an isolated incident.

The case also serves as a reminder that distributors with technician-intensive operations — particularly those servicing tankers, storage vessels, and other confined equipment — face heightened regulatory scrutiny following workplace fatalities.

Whether FleetPride contests the citations or reaches a settlement with OSHA, the outcome could influence how other distributors evaluate confined-space entry procedures, respiratory protection programs, and employee training across their service networks.

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New York Packaging II LLC, doing business as Redi-Bag USA, and its CEO, Jeffrey Rabiea, have agreed to pay $7.3 million to settle allegations that they evaded antidumping duties by falsely declaring Chinese-made plastic retail bags as products of Hong Kong, the U.S. Department of Justice said.

Redi-Bag, based in New Hyde Park, New York, supplies custom bags, liners and packaging to grocery, restaurant, deli, medical, retail, and industrial customers across the U.S. Rabiea is the company’s CEO and a part owner.

The government alleged that Redi-Bag and Rabiea misrepresented the country of origin of certain polyethylene retail carrier bags imported from Dec. 23, 2015, through July 13, 2018.

The bags were manufactured in China and shipped through Hong Kong, but Redi-Bag allegedly listed Hong Kong as their country of origin on customs entry forms. The declarations allowed the company to avoid antidumping duties that, when applicable, totaled as much as 77.57% of the value of qualifying Chinese-made bags.

Federal officials also alleged that Redi-Bag and Rabiea concealed the bags’ origin from the company’s customs broker and U.S. Customs and Border Protection. The alleged conduct included directing employees to cover “Made in China” markings, instructing the manufacturer to remove the markings and canceling orders after learning they would be inspected by customs authorities.

The settlement resolves a whistleblower lawsuit filed Nov. 22, 2021, by John Maierhoffer, a former contracted sales representative for Redi-Bag, in the U.S. District Court for the District of New Jersey.

The federal government partially intervened in the lawsuit for purposes of the settlement. It alleged that Redi-Bag and Rabiea violated the False Claims Act by using false records or statements to avoid paying money owed to the government and conspiring with others to do so.

Under the agreement, Redi-Bag and Rabiea will collectively pay the federal government $7.3 million, including $3.65 million classified as restitution. Interest accrues at an annual rate of 3.64% from May 1 through the payment date.

Redi-Bag is designated to pay $6.789 million, while Rabiea is designated to pay $511,000 individually. The payments are due within 30 days of the agreement’s effective date.

Both defendants remain jointly responsible for the full settlement amount if either designated payment is not made.

Maierhoffer will receive $1,332 million of the government’s recovery, plus a proportionate share of any accrued interest. Redi-Bag and Rabiea also agreed to pay him $225,000 for attorneys’ fees, expenses, and costs.

The settlement is not an admission of liability. Redi-Bag and Rabiea denied the government’s allegations and Maierhoffer’s claims. The agreement also states that the settlement is not a concession by the government that its claims were unfounded.

The Justice Department announced the settlement July 15. Rabiea signed the agreement on behalf of Redi-Bag and in his individual capacity July 10, according to the executed document.

The case comes as the Justice Department expands its enforcement efforts against companies accused of evading tariffs and customs duties. The department launched a cross-agency Trade Fraud Task Force in 2025 to coordinate civil and criminal investigations of tariff evasion, smuggling and other trade-related misconduct.

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Wholesale distributors could face another wave of tariff-driven cost increases as the Trump administration prepares to replace temporary import duties with more targeted tariffs on specific products and countries.

The first major deadline comes July 24, when the administration’s temporary 10% tariff imposed under Section 122 of the Trade Act of 1974 is scheduled to expire. Administration officials have signaled they intend to shift to a longer-term framework built around Section 232 national security investigations and Section 301 trade actions rather than extending the across-the-board tariff.

That approach would replace a broad-based tariff with duties targeted at specific industries, products and trading partners, creating a more complex compliance and sourcing environment for importers and wholesale distributors.

Several trade investigations are nearing completion.

The Commerce Department has completed a Section 232 investigation into imported medical products and submitted its findings to the White House. If the administration adopts the recommendations, new tariffs could apply to imported medical devices, diagnostic equipment and other healthcare products distributed through U.S. supply chains.

The Office of the U.S. Trade Representative also is considering additional Section 301 tariffs targeting imports from several Latin American countries. The proposed duties, ranging from 10% to 12.5%, are tied to allegations that the countries have not adequately addressed forced labor concerns. Public hearings have concluded, and a final decision is pending.

A separate Section 301 investigation involving Brazil could result in tariffs of up to 25% on certain imported products, although the administration has not announced a timetable for a final decision.

The potential actions come on top of revised Section 232 tariffs that took effect in June. Those rules retained 50% tariffs on products made primarily of steel, aluminum or copper while applying 25% tariffs to many derivative products containing those metals.

Metal tariffs affect a broad range of products commonly sold through wholesale distribution, including electrical equipment, industrial machinery, HVAC systems, plumbing products, fabricated metal components, and construction materials.

Trade attorneys and supply chain advisers expect additional product categories could be added as the administration completes ongoing investigations into sectors it considers strategically important, including industrial manufacturing, healthcare, and critical infrastructure.

The evolving tariff landscape is adding uncertainty for distributors already managing higher material costs and shifting global supply chains. Many companies are expanding supplier networks, negotiating longer-term pricing agreements, increasing domestic sourcing where practical and reviewing inventory strategies ahead of potential tariff changes.

While the administration has outlined the direction of its trade policy, key questions remain about which products will be covered, when new tariffs will take effect and whether additional country-specific agreements could alter the final scope of the measures. Until those decisions are made, distributors are likely to continue navigating an uncertain pricing and sourcing environment.

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A year after lawmakers first attempted to establish a national approach to artificial intelligence regulation, Congress has yet to pass comprehensive AI legislation, leaving distributors and other businesses to navigate an expanding patchwork of state laws.

Since mid-2025, three separate efforts by the Trump administration and congressional Republicans to establish a federal AI framework or limit state regulation have either failed, been stripped from legislation or remain stalled in draft form.

The first major effort collapsed in July 2025 when the Senate voted 99-1 to remove a provision from President Donald Trump’s budget reconciliation package that would have imposed a 10-year moratorium on state and local AI regulations. The measure had been approved by the House in May and would have blocked enforcement of state laws governing AI models, automated decision-making systems, and related technologies.

A bipartisan coalition led by Sens. Marsha Blackburn, R-Tenn., Maria Cantwell, D-Wash., Ed Markey, D-Mass., and Susan Collins, R-Maine, successfully pushed to remove the provision before the legislation was signed into law. Sen. Thom Tillis, R-N.C., cast the lone vote against the amendment.

A second attempt emerged later in 2025 when the White House encouraged lawmakers to include federal preemption of state AI laws in the fiscal 2026 National Defense Authorization Act. The proposal faced opposition from leaders of both parties on the House and Senate Armed Services committees and was excluded from the final legislation.

The administration then shifted its efforts to executive action. In December 2025, Trump signed Executive Order 14365 directing federal agencies to develop recommendations for a national AI regulatory framework that would supersede conflicting state laws.

That effort led to the release of the administration’s National Policy Framework for Artificial Intelligence in March 2026. The framework outlines recommendations for Congress to establish a unified federal approach to AI governance and signals the administration’s intention to pursue legislation this year.

Just days before the framework’s release, Blackburn introduced a discussion draft of the TRUMP AMERICA AI Act, a 300-page proposal that represents one of Congress’ most comprehensive attempts to create a federal AI regulatory structure.

The proposal remains in draft form and has not advanced through committee.

Blackburn has frequently argued that Congress should establish federal standards before limiting states’ ability to regulate AI, a position that differs from earlier White House-backed efforts that prioritized federal preemption.

Industry observers are closely watching whether congressional committees begin converting the administration’s framework into legislative language, whether lawmakers narrow preemption provisions in response to bipartisan opposition, and whether Blackburn’s proposal becomes the foundation for broader legislation covering AI governance, child safety, digital replicas, and online content regulation.

Advancing comprehensive legislation remains difficult because AI policy touches multiple congressional committees, including the House Energy and Commerce Committee, Senate Commerce Committee, House Science, Space and Technology Committee, and House Oversight and Government Reform Committee.

The Senate Commerce Committee remains the primary venue for broad AI legislation. In February, Cantwell, Blackburn, Sen. Todd Young, R-Ind., and Sen. John Hickenlooper, D-Colo., reintroduced the bipartisan Future of AI Innovation Act, which would expand the role of the National Institute of Standards and Technology in developing voluntary AI standards and testing programs.

The measure reflects a more incremental approach focused on standards development rather than broad federal preemption of state laws.

Democratic lawmakers, including Reps. Yvette Clarke of New York and Don Beyer of Virginia, along with Sen. Brian Schatz of Hawaii, have continued to raise concerns about accountability, oversight, and federal limits on state authority. Any comprehensive AI legislation would require bipartisan support to overcome the Senate’s 60-vote threshold.

While Congress continues to debate, state governments are moving ahead.

California’s Transparency in Frontier Artificial Intelligence Act and Texas’ Responsible Artificial Intelligence Governance Act both took effect Jan. 1.

Colorado illustrates how rapidly the regulatory environment is changing. A federal judge paused enforcement of the state’s AI anti-discrimination law in April ahead of its scheduled June implementation date. State lawmakers subsequently approved replacement legislation establishing a narrower framework governing automated decision-making technologies, and Gov. Jared Polis is expected to sign the measure.

The pace of legislative activity continues to accelerate. By March, lawmakers in 45 states had introduced more than 1,500 AI-related bills, exceeding the total number introduced during all of 2024.

For distributors, the practical takeaway is increasingly clear: federal regulation remains uncertain, but state compliance requirements are becoming real and enforceable.

Companies using AI for pricing optimization, demand forecasting, procurement, customer service, and other operational functions cannot assume a federal framework will arrive soon enough to simplify compliance obligations. Instead, they face a regulatory environment increasingly shaped by state laws, varying disclosure requirements and expanding governance expectations.

Distributors operating across multiple states may need to establish AI inventories, document governance controls, and monitor evolving state requirements as regulators move ahead without waiting for Congress.

The absence of federal legislation has not slowed AI regulation. It has simply shifted the center of activity to the states.

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Tariff refunds are beginning to flow through U.S. supply chains, creating a new source of tension for wholesale distributors that absorbed higher product costs during the tariff cycle but may not be eligible to receive any of the recovered money.

U.S. Customs and Border Protection had processed $20.6 billion in certified tariff refunds, including interest, as of May 22, while accepted claims totaled approximately $85 billion, according to agency data. The refunds stem from tariffs imposed under the International Emergency Economic Powers Act that were later invalidated by federal courts.

At the center of the issue is importer of record status.

Under federal customs rules, only the importer of record, typically the manufacturer, brand owner, master distributor, or customs broker that formally entered the goods into the United States, can receive refunds directly from Customs and Border Protection. Distributors, retailers, and end customers that paid higher prices as tariff costs moved through the supply chain have no direct claim to the refunds. Instead, they must rely on supplier contracts, rebate agreements, or commercial negotiations to recover a share of the money.

That reality is setting up a new fight across distribution channels.

According to Reuters, some distributors and retailers have already notified importers that they expect compensation if tariff refunds are received. In some cases, companies have warned they may shift future business if suppliers retain the funds. Whether distributors receive any reimbursement, however, will depend on contract language and commercial leverage rather than government policy.

The implications vary significantly based on sourcing models.

Distributors that imported products directly may be positioned to file claims and recover duties paid on qualifying imports. Those companies will then face decisions about whether to retain the funds, issue customer rebates, or lower prices.

For distributors that purchase through manufacturers, master distributors or other intermediaries, the path is less clear. Unless contracts specifically require suppliers to pass through recovered duties, distributors may have little ability to claim a portion of any refund.

Those dynamic places many distributors in a difficult position. Throughout the tariff cycle, distributors passed higher costs to customers through price increases, tariff surcharges, and other cost recovery mechanisms. Now, as refunds begin flowing back to importers, customers are increasingly asking whether those costs should be returned.

So far, there is little evidence that major publicly traded distributors have disclosed refund activity. Companies including W.W. Grainger, Fastenal, Wesco International, MSC Industrial Direct and Global Industrial have not announced tariff refund claims or disclosed expected recoveries.

Several companies outside traditional wholesale distribution have confirmed refund activity. FedEx has said it intends to return tariff refunds to customers that originally paid the fees, while the Associated Press reported the company filed legal action to preserve its refund rights. Reuters has also reported that Oshkosh Corporation and Basic Fun have begun receiving partial tariff refunds.

The issue is creating legal concerns as well.

Trade attorneys are warning that companies that receive government refunds while retaining tariff related price increases could face allegations of double recovery, particularly when customers can document separate tariff surcharges. As a result, many businesses are reviewing historical pricing actions, surcharge language, and customs documentation before filing claims or responding to customer demands.

For distributors, the next phase of the tariff story may have less to do with government filings and more to do with commercial negotiations. Companies are scrutinizing supplier agreements, rebate programs and purchasing contracts to determine whether they are entitled to share in any recovered duties.

The refund process could provide a significant financial benefit for direct importers. For many distributors, however, it may become a customer relations and margin management challenge that determines who bore the cost of past tariffs and who benefits when those costs are returned.

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Two federal court rulings in less than three months have invalidated the legal basis for the Trump administration’s primary tariff programs, setting off a complex refund process that is producing unequal outcomes across wholesale distribution supply chains.

The U.S. Supreme Court ruled in February 2026 that tariffs imposed under the International Emergency Economic Powers Act of 1977 were unconstitutional. On May 7, the U.S. Court of International Trade struck down a second round of tariffs, a 10% global surcharge the administration imposed under Section 122 of the Trade Act of 1974 just hours after the Supreme Court’s February ruling. The court found the administration failed to meet the statutory requirement of a “large and serious United States balance-of-payments deficit” needed to invoke Section 122 authority.

Together, the two rulings expose two rounds of tariff collections to potential refund claims. U.S. Customs and Border Protection has estimated it owes $35.46 billion in refunds on 8.3 million shipments under the first ruling alone, according to a court filing. The government launched a refund portal called the Consolidated Administration and Processing of Entries on April 20. By April 26, importers and customs brokers had submitted approximately 75,300 declarations covering more than 11.2 million individual entries, according to a Customs and Border Protection declaration filed with the Court of International Trade.

Refunds are moving but unevenly. Oshkosh Corporation confirmed May 12 that it had begun receiving payments. Basic Fun, the company behind Care Bears and Tonka trucks, said its initial refunds represented only 5% of its total claim. Large logistics companies including UPS, FedEx and DHL said they would file on behalf of their customers. Approximately 15% of initial portal submissions were rejected during validation, according to legal practitioners tracking the process.

For wholesale distributors, the refund situation is more complicated than it appears. Only importers of record — the companies that paid duties directly to Customs and Border Protection — are eligible to file claims. Distributors that purchased products from manufacturers or importers who passed tariff costs down the supply chain through higher prices cannot file directly with the government. Rich Leao, president and chief executive officer of Norman S. Wright Mechanical Equipment Corporation, an heating, ventilation and air conditioning equipment supplier near San Francisco, described the structural problem plainly. “There lies the problem, because it has to be the importer that has to apply for the credit,” Leao said. His company absorbed tariff costs passed through by manufacturers but has no direct path to a government refund.

That dynamic is generating a secondary dispute across the distribution industry: whether importers who received government refunds will pass any portion back to the customers they originally charged. The answer depends on how tariff costs were billed. Peter Furth, chief executive officer of FFF Associates, said the obligation is clear in his case because his company broke out tariff charges as separate line items in customer contracts tied explicitly to the current tariff rate. “To me it’s clear I owe the money back to the customer,” Furth said. “And by the way, I need to tell you, my customers believe it’s very clear to them as well. They’ve already asked.” Rachel Brewster, a law professor at Duke University, said businesses that simply raised prices without isolating tariff costs face a different calculation. “If you just agree to pay a price for the good, then it’s not clear that you have any legal entitlement to get that tariff back,” Brewster said.

The Section 122 ruling adds another layer of uncertainty. The May 7 Court of International Trade decision was narrow. The court issued a permanent injunction blocking Section 122 tariff collection only for the three named plaintiffs: Burlap and Barrel Inc., Basic Fun Inc., and the State of Washington. It declined to issue a nationwide injunction. The federal government has already appealed and secured a temporary stay from the U.S. Court of Appeals for the Federal Circuit. Section 122 tariffs continue to be collected from all other importers while the appeal proceeds.

The administration has signaled it intends to use Section 301 of the Trade Act of 1974 as its next tariff mechanism. Investigations already underway are expected to produce new tariffs timed to take effect before Section 122 duties expire July 24, 2026.

President Trump added to the uncertainty May 12. In a radio interview on WABC, Trump called the refund situation “crazy” and said he would fight repayment. “In theory, you have to pay the tariffs back. We’ll fight that,” Trump said.

For distributors, the practical steps are clear. Companies that imported directly and paid duties under the International Emergency Economic Powers Act should be filing claims through the Consolidated Administration and Processing of Entries portal. The first phase covers entries finalized within the past 80 days and excludes entries subject to pending administrative protests. Distributors that absorbed tariff costs passed through by suppliers face a different task: reviewing supplier contracts and invoices to determine whether tariff charges were separately itemized, which may support a claim for supplier-level restitution.

The broader trajectory signals continued disruption. Two successive tariff programs have been struck down on constitutional and statutory grounds, and a third mechanism is being assembled in parallel. For wholesale distributors managing supplier contracts, import costs and customer pricing, the legal landscape that shaped purchasing and pricing decisions over the past year may look significantly different by year-end.

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Bottom of Form

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Distribution Solutions Group reported higher sales in the first quarter, but profit declined as tariffs, higher costs and changes in customer demand weighed on results.

The specialty distributor said revenue rose 3.8% to $496.0 million for the quarter ended March 31, from $478.0 million a year earlier. The increase was driven by organic sales growth of 3.6%, along with a small contribution from a recent acquisition.

The company said sales improved across all its business segments, with gains in daily sales compared with both the prior year and the previous quarter.

Profits, however, declined. Net income fell to $0.4 million from $3.3 million in the same period last year.

The company cited several factors regarding the drop, including higher tariff-related costs on imported goods and shifts in the mix of products customers are buying. Gross margin declined to 32.9% from 34.3% a year earlier.

Results were also affected by fewer selling days in the quarter and certain timing-related expenses, the company said.

Despite those pressures, the company said results improved compared with the fourth quarter, as sales and operating performance strengthened during the period.

During the quarter, Distribution Solutions Group completed the acquisition of Eastern Valve & Control Specialties Ltd., a distributor of industrial valve products serving customers in Atlantic Canada. The acquisition is intended to expand the company’s footprint in the Canadian market.

Distribution Solutions Group provides products and services to maintenance, repair and operations, original equipment manufacturers, and industrial technology customers. The company serves about 220,000 customers through a network of distribution and service centers across North America, Europe, Asia, South America, and the Middle East.

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Cardinal Health reported third-quarter revenue of $60.9 billion on Wednesday, up 11% from $54.9 billion a year earlier, as strong pharmaceutical sales helped offset a sharp drop in profits in its medical products business tied to tariffs.

For the first nine months of fiscal 2026, revenue rose 17% to $190.6 billion from $162.4 billion in the same period last year.

Quarterly profit fell 21% to $399 million from $506 million a year earlier, due to a $184 million write-down tied to the company’s Navista and ION oncology unit. Excluding that charge and other one-time items, profit rose 32% to $750 million.

Throughout the first nine months of the fiscal year, profit was flat at $1.32 billion. Without one-time items, profit increased 33% to $1.98 billion.

“An excellent third quarter extends our FY26 momentum, due to the durability and resilience of our business,” CEO Jason Hollar said in a statement. He pointed to strong results in the company’s pharmaceutical unit and said Cardinal Health raised its full-year outlook for a second straight quarter.

Cardinal Health’s pharmaceutical and specialty distribution business, its largest segment, generated $56.1 billion in third-quarter revenue, up 11% from $50.4 billion a year earlier, driven by demand for brand-name and specialty drugs. Profits in that unit rose 18% to $784 million. For the first nine months, revenue increased 18% to $176 billion and profit rose 24% to $2.14 billion.

The company’s medical products and distribution business showed a different trend. Third-quarter revenue was flat at $3.1 billion, while profit fell 36% to $25 million from $39 million a year earlier. Cardinal Health said tariffs were the main reason. Profits as a share of sales dropped to 0.79% from 1.23% a year earlier.

For the first nine months, the medical products business reported revenue of $9.59 billion, up 2%, and profits of $108 million, up 66% from a weak year-ago comparison. But the latest quarter points to growing pressure.

Cardinal Health raised its full-year forecast, now expecting earnings of $10.70 to $10.80 per share. It also increased its expected cash generation to between $3.3 billion and $3.7 billion.

The company said it has repurchased $1.0 billion of its shares so far, this fiscal year and paid down $100 million in debt ahead of schedule.

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