The Hidden Cost of Tariffs: What To Consider When Passing Them Through to Consumers

Update as of 4/9/2025

President Trump’s 90-day pause on tariffs for over 75 countries offers temporary relief, but with tariffs on Chinese goods rising to 125%, and a tariff of 25% on imported automobiles remaining in place, many brands still face significant cost pressures.

The Bottom Line

• As President Trump signals further tariff expansions and intensifies the administration’s “America First” trade agenda, brands should expect more volatility in cost structures.
• Brands looking to adjust their pricing strategy to offset the costs associated with imports need to consider state laws, federal regulation and consumer backlash.

The Trump administration has shaken global markets to their core with a new 25% tariff on all imported automobiles, and tariffs ranging from 10% to 50% on virtually all U. S. trading partners. Although there are lingering questions about whether the Trump administration will delay or negotiate the tariffs, brands have already begun to explore passing some or all of the tariffs through to consumers in an effort to save their bottom line. Fearful that factoring tariffs into a total initial advertised price will alienate consumers, many brands prefer to recoup these as separate fees broken out as surcharges, “import fees” or other line items added at checkout.

However, with “hidden” fees and surcharges already under the microscope under various emerging “junk fee” laws, brands must carefully consider how to characterize and charge them.

Surcharges and “Hidden” Fees Under Scrutiny

In recent years, both the legislators and regulators have taken a keen interest in how brands disclose and charge fees. After years of individual regulatory actions against specific players, most prominently food delivery platforms and ticket sellers, the federal government and individual state governments have introduced new laws and regulations to tackle the area.

California was the first state to act, passing SB 478 – dubbed the “Honest Pricing Law” or “Hidden Fees Statute” – which became effective in July of 2024 and impacts any business offering goods or services to California consumers. The Honest Pricing Law broadly makes it illegal to display a price that does not include all mandatory fees, excluding postage or carriage charges and taxes or fees imposed by a government on the transaction. Since then, Minnesota and Massachusetts have passed similar laws or regulations, and many other states – including New York, Illinois, Florida, Pennsylvania, and Virginia – have introduced (but not yet passed) similar bills.

At the federal level, the Federal Trade Commission (FTC) finalized its Junk Fees Rule in December 2024, which is now effective. Though the final Junk Fees Rule applies only to live events and short-term lodging, its rationale may still provide a window into the FTC’s likelihood to act when it comes to surcharges that impact consumer spending. The Junk Fee Rule was finalized during the Biden administration, but Republican Commissioner Melissa Holyoak – who has continued to serve under the Trump administration – voted to approve the Rule.

These laws and rules vary in their treatment of fees. In some cases, such as California, all fees must be included in the total price. In others, fees can be excluded from the advertised price, but must be disclosed clearly and conspicuously. These requirements all exclude government charges – including taxes – to some degree (which can still be broken out as a separate line item at checkout, rather than baked into the total initial advertised price), but the definition of “government charges” varies significantly. Some states explicitly exclude taxes imposed on the seller and passed through the buyer – which is the case for tariffs – while others are silent on the matter.

Legal and Operational Risk

Regardless of whether a transaction is subject to one of these requirements, brands who try to sneakily pass on tariffs – such as by disclosing them in “mouse type” or on the checkout page – are bound to experience a consumer revolt.

Plus, due to the Trump administration’s willingness to fight President Trump’s personal battles, the federal government – specifically the FTC – may face pressure from the administration to challenge billing practices that point the finger at President Trump’s policies (for example, characterizing a tariff line item as a “Trump Tariff” or other explanation that expressly references the current administration).