Why It Matters
When supply chains break down, retailers hold enormous power over what consumers pay. They can absorb cost increases, as vehicle dealerships did during the Great Recession, or they can raise prices well beyond their own cost increases, as those same dealerships did during the COVID-19 pandemic. The federal government, under current law, has almost no direct authority to constrain that behavior.
A new Congressional Research Service report examines how retailers adjust their inventory management and pricing strategies during supply chain disruptions, and what Congress can do about it. The short answer is not much, at least not yet. Import volumes have collapsed to their lowest levels since the COVID-19 pandemic, retail markups are accelerating, and there is no federal law that prohibits price gouging.
According to the report, the 2025 tariff increases disrupted retail supply chains in ways that were analytically equivalent to a pandemic-era shock. Real imports of consumer goods, excluding food and automotive products, surged 25 percent from the fourth quarter of 2024 to the first quarter of 2025, the largest such increase on record going back to the first quarter of 2007, as retailers front-loaded inventory ahead of tariff implementation.
Imports then fell 26 percent from the first quarter to the second quarter of 2025, followed by further declines of 8 percent and 6 percent in the third and fourth quarters, respectively. By the fourth quarter of 2025, those import levels were the lowest since the third quarter of 2020. Retail sales did not fall at the same rate because retailers drew down existing inventory to keep shelves stocked.
The Big Picture
The report's core argument is that retailers are decision-makers whose responses to disruptions, whether they raise prices, absorb costs, or stockpile inventory, determine how much of a supply shock actually reaches consumers.
The "price" of a retail service is the markup, the difference between what a retailer pays a supplier and what it charges a consumer. In 2024, publicly traded vehicle dealerships typically carried markup percentages between 6 and 9 percent. Publicly traded grocery stores typically ran between 30 and 40 percent. A higher markup percentage does not automatically mean higher profits. Total sales volume and operating costs also shape the bottom line.
Two case studies in the report serve as illustrations.
During the Great Recession, vehicle dealerships absorbed manufacturer price increases rather than passing them on. From December 2007 to January 2009, prices that dealerships paid for new domestic vehicles rose 2.5 percent and 1.9 percent for imported vehicles. Yet dealership markups fell 18.9 percent and consumer prices declined 2.7 percent. Weak demand left dealers with excess inventory and no pricing power.
The COVID-19 pandemic produced the opposite dynamic. Cancelled semiconductor orders cascaded through automotive supply chains, production stalled, and inventories hit record lows just as consumer demand surged on the back of stimulus spending. From January 2020 through June 2022, supplier prices for new domestic vehicles rose 7.3 percent and 3.9 percent for imports. Consumer prices rose 16.2 percent, but dealers covered the gap.
The grocery sector adds another layer of complexity. Starting in 2021 and 2022, droughts reduced beef herd sizes at accelerating annual rates, and avian flu drove poultry culling higher. By 2025, live beef cow inventories reached their lowest level since 1961. Grocery stores raised retail meat prices by a larger dollar amount than supplier price increases, but not by a larger percentage. The report uses this detail to illustrate a nuance that will matter for any price gouging legislation, namely that dollar markups can rise even when markup percentages fall. Legislation that targets percentage increases may miss cases where consumers are nonetheless paying more.
The 2025 tariff data rounds out the picture. Dollar markups at furniture retailers rose 8 percent from December 2024 to December 2025, after declining the prior year. Markups at hobby, toy, and game retailers rose 13 percent in 2025, compared to an average annualized change of zero percent in the prior four years. The report notes that because the tariff shock was widely anticipated, research suggests retailers may increase prices more aggressively than they would in response to an unexpected disruption.
Political Stakes
For the Administration
The findings are a mixed signal. The tariff-driven supply chain disruptions documented in the report are a direct consequence of trade policy choices. The administration has argued that tariffs are a tool for rebuilding domestic manufacturing and supply chain resilience. The report acknowledges that supply chain resiliency policies may reduce short-term scarcity-driven price spikes, but notes they could also increase long-term structural costs if domestic producers carry higher costs than foreign competitors.
The report also documents that the first Trump administration invoked Section 102 of the Defense Production Act during the COVID-19 pandemic to prevent hoarding of health and medical supplies, and that the Justice Department created a COVID-19 Hoarding and Price Gouging Task Force. That authority is available again, but it is narrow. Section 102 prohibits hoarding of materials the President has designated as scarce for the purpose of resale at elevated prices, but it does not prohibit price gouging more broadly.
For Congressional Democrats
The report provides analytical ammunition for price gouging legislation that has been circulating in the 119th Congress. The Price Gouging Prevention Act of 2025 (H.R. 4528 and S. 2321) would presume a violation if sales occur at a "grossly excessive price" during a "market shock." The Cracking Down on Price Gouging Act (H.R. 4720) would amend the Defense Production Act to include price gouging and presume a violation if prices rise by a certain percentage after a supply chain disruption causes a shortage. The Stop Disaster Price Gouging Act (H.R. 2427) would prohibit price gouging after a presidential disaster declaration.
For Republicans
Price caps carry consequences. The report warns that restrictions on retail pricing could trigger store closures, reduce retailer investment in logistics and inventory buffers, and incentivize underground resale markets where goods flow to whoever arrives first or has the most social capital, not necessarily whoever needs them most.
The Promoting Resilient Supply Chains Act of 2025, which passed both chambers in different forms, takes a different approach entirely. It would direct the Assistant Secretary of Commerce for Industry and Analysis to lead an intergovernmental working group to identify supply chains critical to U.S. economic and national security. The Congressional Budget Office estimated the cost at less than $500,000.
The Bottom Line
The report makes two things clear that policymakers on both sides of the aisle would prefer to avoid confronting simultaneously.
First, the 2025 tariff increases function economically as a supply chain disruption. Import volumes in consumer goods categories including furniture, apparel, appliances, and home entertainment equipment fell on an annual basis from 2024 to 2025. Retailer markups in those same categories accelerated. The mechanism the report describes, that anticipated shocks are producing faster and larger price increases, has played out in real time.
Second, Congress has no federal price gouging law. Thirty-nine states, the District of Columbia, and some U.S. territories have statutes or regulations prohibiting price gouging, mostly tied to declared emergencies. The federal government does not. Legislation pending in the 119th Congress would change that, but the choices are challenging. Legislators must decide how to define "excessive," whether to set a dollar cap or a percentage cap, which goods to cover, and how to avoid unintended consequences that leave consumers worse off.
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