The Impact Of Trump’s Tariffs On Foods & Beverages

As witnessed over the past few weeks, in this administration’s ever-evolving arena of global trade, the introduction of tariffs can have far-reaching repercussions on the financial markets, the supply chain and consumers. Newly elected President Trump’s tariffs include a 10% universal tariff as well as so-called reciprocal tariffs on more than 60 countries which could dramatically reshape the U.S. food and beverage industry. These tariffs will be additive, meaning that imports will face both the universal tariff of 10% in addition to specific reciprocal import levies by each nation; for example, 34% on China, 24% on Japan, 46% on Viet Nam and 20% on the European Union. According to the USDA, about 17% of the total US food supply is imported, and the implementation of these tariffs will significantly raise the cost of imported goods. It’s crucial to understand how these tariffs will affect importers, distributors, retailers, and consumers in this extremely challenging landscape.

Imported Foods Dilemma

Importers form an important base of the food supply chain, and the implementation of these tariffs will significantly raise the cost of imported goods. Importers might initially absorb some costs to maintain their competitive edge, but over time, the price increases will inevitably flow downstream to distributors and other stakeholders.

The larger 34% tariff on Chinese imports would exponentially escalate these costs – especially on fresh and processed fruits and vegetables, apple juice, garlic spices, tea and shrimp. Of the approximately $450 billion in China exports to the US, in 2023, some examples, fish accounted for over $1.3 billion, animal and vegetable oils $850 million, Vegetable, fruit and nuts $1.3 billion. China actually accounts for more than 80% of the garlic production globally. Your apple juice also most likely came from China as they are the world’s largest producer and exporter of concentrated apple juice and supplies two-thirds of the apple juice here in the United States. This tariff could make imports from China financially untenable for many consumers.

Mexico has become America’s produce aisle in many ways. Those avocados for your toast? More than 80% come from Mexico. The tomatoes in your salad during winter months? Likely Mexican. Mexico supplies about half of all vegetables and 40% of fruit that the U.S. imports. For seasonal products like fresh produce, we’re looking at potential price hikes between 10-25%. That’s particularly true for products where Mexico dominates U.S. imports, like avocados (we import 90% of avocados from Mexico) or berries (67% of imported strawberries, blueberries, raspberries and blackberries come from Mexico). Due to climate changes, U.S. farms can’t grow tomatoes or berries year-round in most regions, so Mexican imports fill crucial winter and early spring gaps. Tariffs disrupt this complementary relationship, potentially leading to shortages during certain months or wild price swings throughout the year. Beyond the produce department, think about your favorite tequila or that Mexican beer (the top selling beer in the US is Corona Extra) Mexican beer in your refrigerator – these too cross the southern border by the billions of dollars annually.

Canada’s food contributions are quite different but equally important, in fact we imported $40.5 billion of food in 2023 from our northern neighbor. They’re a major source of meats, especially pork and beef, salmon, crab, and lobster. And if you love maple syrup on your pancakes, there’s an 85% chance it came from Canada. They also send export significant amounts of grains, canola oil, and processed foods to the US. Fifty-eight percent of our aluminum comes from Canada and with the 25% tariff we can expect every soft drink, beer and canned cocktails sold in our supermarkets to see price increases as well.

Costs Will Rise

Distributors, who serve as the vital link between importers and retailers, will experience a sharp increase in acquiring their foods and beverages. Adjusting to these hikes will involve recalibrating supply chains, exploring domestic sources, and possibly renegotiating terms with retailers all of which will drive up the retail prices for consumers. Disruptions in established supply networks could cause temporary shortages, particularly if alternative sources cannot match the volume and quality previously sourced from international suppliers, especially China.

Retailers, who have recently come under fire and scrutiny for high prices, are at the frontline of consumer interaction, and are likely to face immediate challenges as tariffs trickle down to shelf prices. The tariffs could also compel retailers to rethink their product offerings. A commitment to promoting domestic goods may become a reality someday, but this transition requires careful consideration and strategic planning – and takes time. Retailers could also experience initial stock shortages as they adjust to new supply agreements—an issue that could put added strain on customer loyalty if popular items become unavailable. Retailers must also prepare for potential backlash from consumers who are uninformed about the reasons behind price hikes. Undermining the efforts of those retailers trying to help their shoppers while higher grocery prices are already commonplace.

Consumers’ Sticker Shock Will Change Behaviors

For consumers, the most visible effect of these tariffs will be inflated prices at the checkout counter. Imported items ranging from specialty cheeses and wines to everyday groceries will become noticeably more expensive. As food prices rise, consumers’ purchasing patterns will shift, good news for store brands as they start favoring budget-friendly buys over luxury imports and pushing the market basket value downward. Yes, all this could stimulate the growth of local producers, but the question is whether they can meet the demand for supply – and a big if, if they can produce as cheaply as say China – or if they can meet the quality standards of say a cheese from Italy or jam from France.

The speed at which these tariffs could impact the market depends on the timing of their implementation (the universal tariff goes into effect April 5 and the reciprocal tariffs April 9) and the existing inventory cycles. Importers and distributors may experience immediate cost pressures, while retailers and consumers might see gradual changes as existing stock is sold and replaced with newly priced goods. The tariffs assumed by Trump on imported foods and beverages present a complex challenge to the U.S. food industry. Importers, distributors, retailers, and consumers each have their own challenges in adapting to this new economic landscape.