Costco Wholesale Corp (COST) isn't just absorbing tariff costs quietly. The warehouse retail giant filed a lawsuit Friday against the Trump administration, directly challenging the legal basis for tariffs imposed under the International Emergency Economic Powers Act. And they want their money back—all of it.

The Legal Challenge

Costco's lawsuit, filed with the Court of International Trade, zeroes in on a critical question: Does the IEEPA actually give the president authority to slap tariffs on imports? The company says no, arguing the act doesn't explicitly grant that power, which would make the tariffs legally invalid.

The stakes here are massive. If the Supreme Court rules these tariffs unlawful, what happens to all the businesses that have already paid up? Costco wants urgent court action, especially after Customs and Border Protection rejected its request to delay the timeline for finalizing tariff determinations. The company isn't alone in this fight—several other firms including Revlon Consumer Products Corp and Kawasaki Motors Manufacturing Corp have filed similar challenges since late October.

Supreme Court Decision Looms Large

The U.S. Supreme Court is positioned to make a consequential ruling on Trump's emergency tariff powers under the 1977 IEEPA law. We're talking about potentially nullifying up to $145 billion in tariffs. Prediction markets have already reacted, with odds of the Court upholding the tariffs plummeting to just 21%.

But here's the catch: even if the Court strikes down the tariffs, economists warn that existing trade barriers won't vanish overnight. Goldman Sachs economist Alec Phillips points out that resolving the financial implications—potentially $115 billion to $145 billion in collected tariffs—could drag on for years. Refunds would likely require extensive court involvement and won't happen quickly.

Costco's Strategic Response

This legal action aligns with Costco's broader strategy to minimize tariff damage. The company recently announced plans to ramp up production of items under its Kirkland Signature private label brand. Executives have emphasized working closely with suppliers to find creative ways to offset tariff-induced cost increases.

The timing is interesting. Costco just wrapped up a strong fourth quarter in fiscal 2025, beating both revenue and earnings estimates. Despite acknowledging tariff headwinds, management expressed confidence in using the company's massive global buying power and deep supplier relationships to limit price hikes for customers.

Looking ahead, Costco is set to release its fiscal Q1 results after markets close on December 3. Analyst Joseph Feldman of Telsey Advisory Group maintains an Outperform rating with a $1,100 price target, pointing to the company's robust sales momentum, impressive membership renewal rates (serving roughly 145 million members), and continued profitable market share gains.

The retailer ranks in the 86th percentile for quality and the 95th percentile for growth, reflecting its strong operational performance even amid trade policy uncertainty.

Price Action: Costco stock has declined 13.71% over the past six months. On Tuesday, shares fell 0.18% to close at $911.96.