Brands debate the pros and cons of tariff surcharges at checkout as costs climb

Co-founder and CEO Alexandra Fine, who announced the change Wednesday in a viral LinkedIn post, said she viewed the fee as both a business necessity and an opportunity to be transparent with customers. 

“It’s a little bit of a protest,” Fine told Modern Retail. “It sucks to have to raise your prices, and I kind of wanted to pass blame.”

The $5 doesn’t cover the full cost of Trump’s tariffs. The real cost increase is closer to at least $10 per item, Fine said in an interview. “It’s more to make the point than to really pass on the full cost.”

For Dame, the tariff surcharge is as much a marketing tactic as it is a pricing strategy. Still, Fine said the surcharge is likely only temporary. The challenge for brands like Dame is that the fast-changing trade landscape makes it difficult to accurately calculate their new operating costs. She said the Trump surcharge will likely be replaced with permanent price adjustments once the brand can conduct a more thorough pricing analysis.

Like other brands, Dame was caught off guard by the sweeping scope of Trump’s latest round of tariffs. The White House has since implemented a 90-day pause on some reciprocal tariffs — marketed as “Liberation Day” duties — but a 10% universal tariff on all trading partners, except Canada and Mexico, has not been paused. Tariffs on China will also continue, and in fact those duties have risen to 145% from 104%, the White House clarified on Thursday.

“We’ve been working on this slowly, and we were trying not to make changes. But now it just feels like we have to,” Fine said. “We would have been very solidly unprofitable last year if these tariffs had been implemented then.”

The effort has resonated with customers, at least anecdotally. “People are loving it,” she said, pointing to supportive comments on Dame’s social media accounts, such as Instagram. “Some people were like, ‘We think you should do it forever.’”

Still, she admits last-minute fees at checkout may be hurting conversion.

“If we just raised [the price] $5, I think I’d have a higher conversion rate than adding the $5 at the end, because it’s kind of like, oh, you think something is $140, and then you get to the checkout and there’s this extra $5, and that’s a shitty experience,” Fine said. “It probably is hurting conversion right now, but I think people not having money is what’s really going to reduce my sales.”

A surcharge moment

Dame isn’t the only business experimenting with visible tariff fees. Libertyville Coffee Co., a small roaster based in Illinois, added a line-item “Tariff Fee” at checkout after new tariffs on imported green coffee took effect in early April.

“Imported green coffee just got more expensive due to this tax,” Libertyville owner Brian Bossler wrote in a blog post that was posted on April 2. “And since about 40% of the price you pay is tied directly to the cost of the green coffee itself, these tariffs ripple through the system.”

Rather than quietly raise prices, Libertyville opted to show the fee to customers, calculating it based on the country-specific tariff rate. For example, a 25% tariff on coffee from Mexico results in a 10.3% fee at checkout.

The company has since removed the tariff fee after Trump paused implementation of tariffs on many countries, but the brand said in a revised blog post that it would revisit the surcharge in July “as needed” when the 90-day reprieve ends.

Still, even though Libertyville’s tariff surcharge was short-lived, the company faced some backlash. While most consumer responses were neutral, one wholesale client ended its relationship with Libertyville over the fee.

“Someone’s political affiliation outweighed their knowledge of how tariffs work, and they made a snap decision,” Bossler said in an interview.

As Modern Retail previously reported, the spice brand Burlap & Barrel recently held a “tariff sale” to clear out inventory and increase cash flow. The sale “was one of our biggest days ever in nine years,” the company told Modern Retail.

Whether or not to add a tariff surcharge is a hot topic in the industry right now. At Modern Retail’s Marketing Summit earlier this week, one marketer said their brand would be testing breaking out tariff costs into a separate line item. Chipmaker Micron is also set to impose a tariff-related surcharge on some products, per Reuters, and Jolie, a showerhead brand that makes its products in China, told The Information that it’s planning to add a “Trump liberation tariff” fee at checkout.

A growing response to uncertainty

With China-specific tariffs in effect, brands like Dame that manufacture the vast majority of their products in China, are feeling the pressure.

As such, Dame has entirely stopped importing goods and is instead relying on inventory on hand. Dame is also slowing down new product development that relies on Chinese manufacturing. “We’re de-prioritizing some of the product development we have there and prioritizing the product development we have here in the U.S.,” Fine said.

Sky Canaves, a retail analyst at eMarketer, said the strategy of adding a visible tariff surcharge could become increasingly common, particularly among direct-to-consumer brands that have less flexibility to absorb costs. “I think we will see some more momentum behind this strategy,” she said. “As more brands and retailers adopt the tariff surcharge, others will see that and follow suit, so it could become quite normalized.”

At the same time, Canaves cautioned that retailers walk a fine line with consumers. “Getting a surcharge at checkout can certainly come as a shock and can lead to abandoned carts when they weren’t expecting it,” she said. But she added that if communicated clearly and up front, the approach can be effective.

Whether more brands follow suit remains to be seen. But at least for now, a growing number of small businesses are choosing to show the cost of tariffs, rather than quietly pass them on.

“It’s definitely a little bit of marketing,” Fine said. “But it’s also us using our voice.”