F&B industry braces for Trump’s trade tariffs: Rising costs, supply shocks, and menu changes

The food and beverage industry has reacted strongly to US President Donald Trump’s announcement that Canada, Mexico, and China will be subject to import tariffs. Vegetables, alcoholic drinks, and other agricultural products are expected to take a big hit, and there are fears of price hikes for both businesses and consumers.

Over the weekend, Trump signed three executive orders implementing 25% trade levies on Canada and Mexico and 10% on China. The three nations are the US’ largest trading partners, accounting for around 40% of its trade.

The trade wars — similar to Trump’s first term in office — have caused market turbulence, with prospects of a sharp global turndown and renewed inflation. 

Since his initial announcement, the president has postponed the levies on Canada and Mexico by one month after talks with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum. However, the tariffs on China begin today, paving the way for a global economic conflict. 

Key US importers

James Knightley, US chief international economist at ING, tells Food Ingredients First that the scale of the trading relationships is significant. In 2023, the US imported around US$189 billion of food, which is about 15% of all the food and beverages consumed. All live animal imports came from Mexico and Canada, while a third of all beverage imports were from Mexico.

He believes tariffs could boost the competitiveness of US businesses and farmers. But, it’s unclear whether they can scale production quickly enough to give retailers the option to push out imports from supply chains and grocery stores. 

“For some, it is possible, but supply chains take time to re-negotiate, and it takes time to source alternatives. At the same time, many of the food items need to be sourced from abroad due to the seasonal nature of the food industry — the US can’t produce enough of every fresh product all year round,” says Knightley. 

The US will still need to import items, with many popular products having a strong national identity, such as French brie or Italian pasta. “US consumers are prepared to pay up for premium items and will just have to pay the price,” he explains.

Mexico has been a dominant avocado import source for the US.

According to US Department of Agriculture data (2023), Mexico has been the dominant avocado import source for the US market, representing around 90% of imported shipments over the last five years. The US imported around US$3.38 billion worth of tomatoes in 2023, with Mexico its largest importer (US$2.8 billion). This figure was up 9.3% from 2022.  

After Trump postponed levies, Canada agreed to pause its retaliatory tariffs. It had initially announced a 25% tariff on US$155 billion worth of US goods, responding to what it called “unjustifiable” and “unreasonable” taxes. 

Meanwhile, China has launched an antitrust investigation into Google and imposed 15% tariffs on coal, large-displacement vehicles, and pickup trucks from the US in a flurry of countermeasures. 

Assessing the impact

In a statement shared with Food Ingredients First, Michelle Korsmo, the National Restaurant Association’s president and CEO, says it is “closely monitoring” the plans’ impact on pricing, domestic sourcing options, and menu adaption.

“In this rapidly changing landscape, small business restaurant operators are assessing how they will be impacted so they can manage pricing pressures, secure key ingredients, and make potential menu adjustments — all while continuing to serve their communities,” she adds.

The US tariffs have been issued under the International Emergency Economic Powers Act (IEEPA), which allows the White House to regulate international trade in times of emergency. The US government says the emergency is the illegal flow of fentanyl into the US, primarily from China and Mexico.

US Chamber of Commerce senior vice president John Murphy says such levies under IEEPA are “unprecedented” and won’t address issues related to fentanyl supplies entering the US. He says “it will only raise prices” for US families and “upend supply chains.”

“The Chamber will consult with our members, including main street businesses across the country impacted by this move, to determine next steps to prevent economic harm to Americans. We will continue to work with Congress and the administration on solutions to address the fentanyl and border crisis,” he explains.

Restaurants may have to make menu adaptions as prices may rise for popular import items like tomatoes.

Is the EU next?

The National Grocers Association (NGA) tells Food Ingredients First that it is hopeful the trading tensions “can be resolved quickly.” 

“The NGA looks forward to working with the Administration to reduce costly regulatory burdens and revitalize Main Street businesses that have been strained by decades of lax antitrust enforcement, effectively allowing big box chains to dominate markets at the expense of local competitors and communities across the country,” says Greg Ferrara, president, and CEO.  

Levies on EU imports are expected to be next on Trump’s tariff agenda, with him telling reporters, “it will definitely happen.” According to European Commission data, the US is one of the biggest destinations for EU exports, accounting for nearly US$30 billion in 2023. Popular categories include wine, beer, cheese, dairy, olives, and chocolate.

French Prime Minister Emmanuel Macron has said that if EU commercial interests are attacked, Europe “will have to make itself respected and therefore react.”

The UK, which relies less heavily on the US than other trading partners (it exported US$3 billion worth of goods in 2023), could escape heavy taxes. Trump has spoken of having a good relationship with Prime Minister Keir Starmer and has commented that trade relations between the two countries could “be worked out.”