Retailers Exploiting US-China Trade War for Price Increases: Report
A new study has found that price increases implemented by companies during tit-for-tat trade escalation between the U.S. and China far exceeded the levels that the duties themselves would have justified.
The report from researchers at the marketing services agency Growth Bite found that prices rose significantly during the six-week period in April and May when both tensions and tariffs peaked—“weeks before any tariffed goods could reach store shelves.”
Lead researcher Adomas Šulcas told Newsweek that the timing and magnitude of the price hikes provided “compelling evidence that retailers used the announcement as a pricing opportunity beyond what supply-side pressures alone would predict.”
Why It Matters
Many companies have this year said they will be raising prices as a direct result of President Donald Trump‘s tariffs. The White House has pushed back, arguing that larger businesses have sufficient margin space to accommodate the import taxes without affecting consumers—a growing number of whom are already grappling with affordability issues. The report provides offers insight into these dynamics, how retailers respond to tariff announcements, and the extent of price pass-through that can be expected in any future escalation.
However, the researchers note that “while a corporate greed narrative may seem enticing, our findings are just as important to policymakers,” and conclude that the high visibility of tariff escalations “may harm consumer welfare more than tariffs themselves.”
What To Know
Researchers analyzed 1,900 consumer products and tracked prices across 19 product categories—100 per category—from September 2024 to August 2025. The longer scope provided a benchmark to examine price changes during the period when trade tensions between the U.S. and China were at their highest—between Trump’s “Liberation Day” announcement on April 2 until the eventual suspension of the 145 percent rate on Chinese imports following a truce in mid-May.
“For consumers, the implications were significant,” the researchers wrote. “During the six-week trade war period, shoppers paid elevated prices on pre-tariff inventory, transferring wealth to retailers as windfall profits rather than to governments as intended tax revenue.”
The report found “statistically significant preemptive price increases” over the period in question, with average increases of 1.8 percent per two-week stretch, which accelerated to over 2 percent, compared to a 0.4 percent baseline.
“Reciprocal tariffs seem to incentivize retailers to exploit ‘trade war’ narratives for margin expansion,” the report read. “Businesses raise prices immediately upon retaliation announcements, despite holding inventory purchased at pre-tariff rates and with additional tariff-exempt stock already in transit.”
Not only did biweekly price increases accelerate, they ended up affecting nearly 43 percent of products.
“That indicates that not only did the Liberation Day effect affect prices themselves, but that more products than usual were affected, meaning more retailers increased prices, at a faster pace, and on a larger number of products than in any other period we analyzed,” said Šulcas.
Šulcas told Newsweek the team considered “several counterfactual options” to explain the outsized fluctuations, including a higher baseline, the level of imports from China and the seasonality of demand, but that “none of these provided sufficient explanations for the price surge.”
The findings back up those from a Fed Beige Book report and a survey from the New York Federal Reserve, published in May, which found that a “significant share” of companies were raising prices on goods and services “unaffected by the tariffs.”
“A heavy construction equipment supplier said they raised prices on goods unaffected by tariffs to enjoy the extra margin before tariffs increased their costs,” one section of the Beige Book report read.
However, the researchers noted that the “manner” of tariff announcements—their “unprecedented scope, high visibility, and explicit ‘trade war’ framing”—had helped to create conditions “where widespread price increases faced minimal competitive pressure.”
“Overall, it is clear that high-profile, politically charged tariff announcements produce bigger and faster price hikes than quietly implemented policies,” concluded Šulcas. “The way trade policies are announced may harm consumer welfare more than tariffs themselves, and should be considered in the future.”
What People Are Saying
The report read: “High-visibility trade war threats, whether eventually implemented or not, create perverse incentives for businesses to engage in profit-maximizing behavior, harming consumer welfare more than quiet policy implementation.”
What Happens Next
As Šulcas noted, there have been several reescalations on the U.S.-China trade front since the May truce, with both sides accusing the other of violations and each introducing new export restrictions. However, Trump is set to meet with his Chinese counterpart Xi Jinping on Thursday and has expressed confidence in reaching a deal which benefits both countries.
Regarding price increases, Šulcas believes retailers’ capacity to absorb tariff impacts thanks to earlier stockpiling may be waning, potentially leading to more directly tariff-induced hikes in late 2025 and into next year.
“Businesses are likely running out of pre-tariff inventory (or already have),” he said, “making them face one of two decisions–absorb at least some part of the tariffs or pass them on to consumers.”
Read Newsweek’s conversation with lead researcher Adomas Šulcas below:
Do the figures provide evidence that retailers/companies capitalized on the public tariff announcements to raise their prices?
Yes, at least some did. Our data shows that not only did biweekly price increases surged ~5x after Liberation Day, but that the number of product categories affected by the price increases also surged (~28 percent to ~42 percent). That indicates that not only did the Liberation Day effect affect prices themselves, but that more products than usual were affected, meaning more retailers increased prices, at a faster pace, and on a larger number of products than in any other period we analysed. The synchronicity of price increases across previously stable categories, coupled with the 5x surge in magnitude, provides compelling evidence that retailers used the announcement as a pricing opportunity beyond what supply-side pressures alone would predict.
We also considered several counterfactual options (increasing our “natural baseline”, accounting for China being a major exporter, even seasonality (did not make it into the final draft))–none of these provided sufficient explanations for the price surge.
Is this effect likely to be the case with further tariff announcements since earlier this year, given the point about stockpiling inventory–i.e. might the actual tariff impacts on prices become more significant?
We believe the relationship will be more complicated. According to our research, by September 2025, 37 percent (7 out of 19) categories reverted prices back to pre-Liberation Day, indicating that the Liberation Day effects were at least somewhat transitory. While we can’t provide exact figures after September 2025, our expectation is that prices would follow an N-shaped curve over 2025: sharp increase (April Liberation Day) → decline (by September) → gradual increase (late 2025-2026 as pre-tariff inventory depletes). Businesses are likely running out of pre-tariff inventory (or already have), making them face one of two decisions – absorb at least some part of the tariffs or pass them on to consumers. My personal (lead researcher’s) expectation is that larger retailers will likely absorb as much of the tariff cost as long as possible to weed out weaker competition. It’s a prisoner’s dilemma where the first mover to raise prices risks market share loss, but eventually market-wide cost pressures force collective repricing.
This remains speculative without post-September data, but I should note that, time and resources permitting, your question would be the exact next step in our research. We’re particularly interested in how much of the tariff is passed on to the consumer how quickly.
Can you provide a general forecast for the long-term price impacts and how transitory/lasting these might be?
Liberation Day effects have largely passed, although the trade war recently restarted (and seems to have subsided partly again). Our research shows that with enough visibility on proposed economic policy, retailers capitalize on the potential for windfall profits for a few months; however, competitive market forces likely pull them back in less than a year. Actual tariff effects will be real – there’s no way around increased taxes. Again, while we’re working on the next research that will answer these questions, our intuition says that price increases due to actual tariffs (i.e., when companies pay levies at ports) are likely to follow a slow, upward trend. In other words, we expect a sequential repricing pattern correlated with retailer characteristics: smaller players with limited working capital and lower margins → mid-tier retailers → largest players with deepest pockets. This would appear as a stepwise upward drift in category-average prices rather than a synchronized shock. On a graph that would look like a smooth upwards trend, but looking at data points specifically, you’d likely see small, sharp jumps as smaller retailers raise prices with increasingly larger ones following suit later.
However, the volatility in trade policy itself (escalation, de-escalation, exemptions) creates ongoing announcement effects that could continue to add noise to this underlying trend.