Are Brands Using Tariffs to Pad Margins?

Over the past few months, tariffs on Chinese imports have been a moving target.

First they spiked—up to 145% by May—before getting paused for 90 days, landing us now at an extra 30% on top of any existing base tariffs.

But here’s the real question: Are brands actually paying these tariffs? Or are they using them to justify higher prices?

This post breaks down one example, does the math, and shows how some companies might be turning tariffs into a profit center.

Example In Footwear 👟

I came across a $90 pair of shoes with a $30 “tariff fee” added at checkout.

Let’s run the numbers.

If the brand is simply trying to cover cost, which is how it’s interpreted by most consumers, then at $30, assuming a 15% baseline tariff + 145% additional at peak, they would be paying 160% tariffs on a product that costs $18.75 to manufacture. (160% of $18.75 = $30.)

That only makes sense if every unit was imported during the peak of the tariff hike—which almost no one did.

More likely, most if not all of their inventory was imported at a lower than peak tariff rate. Some may have been imported in January before tariffs began, and at 15% that would imply only a $2.81 tariff. Even if some of their goods were imported when tariffs were at 45% total, the cost would be $8.44 per unit.

So they’re charging $30, but they’re actual blended tariff break-even cost is probably $10, or $20 if they were unlikely with import timing.

That means they are almost certainly profiting off of the tariff fee.

On The Brand Side - What’s Going On? 💭

Most brands are picking a tariff number that covers their worst-case scenario—the most expensive SKU at the highest tariff.

They’re not doing custom math for every SKU or import batch. It’s the same playbook as shipping fees: charge flat, keep it simple, and let the margin sort itself out. Tariff rates are messy, change often, and most teams don’t have the time or incentive to be exact.

 A lot of this is just about testing what works to lift AOV and margin.

Zooming Out 🌎

I don’t think this is a bad thing. Most e-commerce companies are doing whatever they can to stay profitable so they can reinvest into growth.

If they don’t have extra working capital, they can’t compete with bigger players. They have to experiment—that includes how they present discounts, shipping, and fees like tariffs. A lot of this is just about testing what works to lift AOV and margin. Tariffs are also just hard to pin down. Rates change, products get classified differently, and trying to calculate and display an exact tariff fee on every product would be a mess for the brand and the customer.

So yeah, some brands are probably padding margins using tariffs—and when it stops working, they’ll change it.