Is It Tariffs or Corporate Price Gouging? How to Tell the Difference

The debate over whether U.S. companies are merely passing along tariff costs or exploiting them for extra profit has recently intensified. A New York Federal Reserve June survey found that roughly 75% of firms in its district passed on some tariff-related cost increases — some even hiked prices on goods not subject to tariffs.1

Meanwhile, perceived price spikes in unrelated categories,2 such as dryers or toys3 segments unaffected by tariffs, are raising questions. Learn more about what tariffs are and what they cost, how to spot legitimate price adjustments versus questionable markups, and practical methods you can use to hold companies accountable.

It’s also important to point out that tariffs are an old concept that have gained more attention recently. Dating to 2016, or starting with President Donald Trump’s first administration, customs duties collections increased by $233 billion through March 2024.4

Of that $233 billion, $89 billion was collected during the Trump administration. The remaining $144 billion was collected during President Joe Biden’s administration.

How Tariffs Work

The concept of tariffs can be complicated to understand, especially since the tariff policy keeps shifting. But once you have a basic understanding of how they work – and how they affect the price you pay for goods – you can more easily determine which costs are legitimately passed on to you, and which might be corporate profiteering.

Who Really Pays the Tariffs?

Tariffs are taxes imposed on imported goods, paid by importers at the border. They are intended to make foreign goods more expensive for U.S. importers, but most businesses pass those added costs onto consumers, resulting in higher prices for shoppers.2

Tariffs Are on Wholesale – Not Retail – Prices

Tariffs are applied at the wholesale level — meaning the tax is charged when U.S. businesses import goods, not when customers buy them in stores. They must pay the tariffs before they can get the goods released to them by U.S. Customs. This extra cost becomes part of the price that retailers pay to stock their shelves.

What Does This Mean for Prices?

When a business pays a tariff on imported goods, its cost to acquire those products rises. Most businesses pass this added cost on to consumers by raising retail prices. Recent data from the Federal Reserve Bank of New York confirms this pattern. In a May 2025 survey of manufacturers and service firms, about three-quarters of businesses reported passing at least some of the higher tariff costs on to customers by raising prices. Nearly a third of manufacturers and almost half of service firms said they fully passed along all tariff-related cost increases to consumers.5

But the amount of increase is not necessarily limited to the actual dollar amount of the tariff paid on an import. That’s because tariffs are paid by businesses at the wholesale level, and retailers will typically add their usual markup to the increased wholesale price.

For example, suppose a retailer used to pay $100 wholesale for an imported item. If a new tariff adds $10, the retailer now pays $110. With a typical 30% markup, the old retail price was $130 ($100 + 30%). After the tariff, the new retail price becomes $143 ($110 + 30%), meaning the 10% tariff at the wholesale level translates to a roughly 10% increase of the retail cost.

Price Gouging Versus Cost Pass‑Through

Price gouging happens when companies hike prices well beyond cost increases — and perhaps a corresponding bump to account for profit margin. It’s especially suspect when applied to items not subject to new tariffs. It’s often a method to inflate profit margins.6 The NY Fed noted a “significant share” of firms increased prices on items not affected by tariffs.5 Here are a few ways to spot it.