You can’t blame the food world for feeling like it’s on a tariff rollercoaster.
On February 1, President Donald Trump announced plans to impose 25% tariffs on goods from Canada and Mexico. However, less than a day before they were set to take effect, Trump granted each country a month-long reprieve after they pledged to step up border enforcement.
The initial announcement sent shockwaves through the food industry and spurred Canada into swift action. Prime Minister Justin Trudeau retaliated by announcing similar tariffs on a wide range of goods. Liquor stores quickly pulled U.S. products like bourbon and beer from their shelves.
On social media, Canadians responded with calls to cancel vacations to the United States, boycott American-made goods, and support Canadian-owned businesses instead. Some circulated lists of Canadian companies to patronize, though not all were accurate.
Now, however, it looks like tariffs are for real. On Thursday, Trump signed a memorandum declaring the U.S. would implement “reciprocal tariffs” on goods from any country that imposes tariffs on American products.
According to The Hill, these tariffs will be tailored to each foreign trading partner based on five factors: tariffs the nation imposes on U.S. products, taxes the U.S. deems “unfair,” the cost to U.S. businesses and consumers due to another country’s policies, exchange rates, and any other trade practices deemed unjust by the trade representative’s office.
If nothing else, the announcements have created widespread confusion. Here’s what you need to know to make sense of the situation.
What is a tariff?
Simply put, a tariff is a tax on imported goods. These taxes can be applied on finished products or raw materials and are sometimes called “import duties” — fees paid to allow products to enter a country.
Proponents argue that tariffs protect domestic industries by making locally produced goods more competitively priced. “Tariffs are the greatest thing ever invented,” Trump said last fall in Flint, Michigan. Opponents, however, content that tariffs stifle competition and drive up prices for businesses and customers.
A report from the Petersen Institute for International Economics projected that widespread tariffs could slice one percentage point from the U.S. economy by 2026 and boost inflation by two percentage points. It calculates that if fully implemented, the tariffs could cost the average American household approximately $1,200 per year.
Who pays the tariffs?
Tariffs are paid by companies that import goods. In the U.S., the Customs and Border Protection Agency collects tariffs at 326 points of entry across the country, with the revenue going to the U.S. Treasury.
Can U.S. food and drink companies afford tariffs, and will consumers be impacted?
This is a pressing concern in the food industry, where grocery and restaurant prices have already surged since the beginning of the COVID-19 pandemic. Companies typically handle tariffs in one of two ways: They either pass the cost directly to consumers by raising prices or pressure suppliers to lower prices to absorb the tariff’s impact.
Things get more complicated when a company imports ingredients for products made in the U.S. Some ingredients may be subject to tariffs, while others are not. In that instance, producers or chefs might have to average out the cost of the tariff across everything used and then increase the cost by that much.
Are tariffs a threat to the food industry?
Before the situation calmed down, Canada announced a long list of items on which it planned to impose tariffs — some $30 billion in all. And as one of the top three U.S. trading partners, Canada’s response carries some weight.
In 2022, 63.2% of U.S. agricultural imports from Canada consisted of meat, animal products, grains and feeds, and oilseeds and oilseed products, according to the United States Department of Agriculture. Leading imports included biscuits and wafers ($4.2 billion), followed by rapeseed oil ($3.8 billion), beef and beef variety meats ($2.6 billion), cocoa and cocoa preparations ($1.9 billion), pork and pork variety meats ($1.4 billion), and frozen potatoes ($1.4 billion).
Without these goods, food companies, chefs, and supermarkets will need to find alternatives. While supporters argue that tariffs will encourage domestic production, industries can’t establish factories and staff them overnight. The meatpacking industry, for example, faced severe disruptions during the pandemic when outbreaks shut plants for weeks at a time. Similarly, Similarly, ongoing supply chain challenges persist, particularly in the egg market, which has been heavily impacted by avian flu.
What can businesses do if there are no alternatives?
That’s exactly the prospect raised by Toasts Not Tariffs, a group of 52 associations representing the U.S. alcohol industry. In a letter to Trump, the group emphasized that their industries collectively support more than 15.7 million jobs. They warned that retaliatory tariffs from Canada and other nations could harm American workers more than they help.
The group urged the administration to avoid imposing tariffs on alcoholic beverages such as wine, beer, and spirits, highlighting that certain spirits have unique geographical origins and cannot be produced elsewhere. “Some spirits are recognized as ‘distinctive products’ by the U.S. and its trading partners and can only be made in their designated countries, such as bourbon and Tennessee whiskey in the U.S., tequila in Mexico, Cognac in France, and Scotch whisky in Scotland,” the group said.
What can the average U.S. consumer do to brace for impact?
For now, if you have a favorite foreign-made product — such as Canadian maple syrup, spices, cheese, or beer — it may be wise to stock up. Even rumors of tariffs can drive prices higher, and if new fees take effect, shortages could follow.
While tariffs may seem like a new issue for many Americans, they are rooted in history. In 1930, President Herbert Hoover signed the Smoot-Hawley Tariff Act, which raised tariffs on imported goods. Intended to protect American farmers, the law instead triggered a sharp decline in international trade as foreign companies turned away from the U.S.
Historians believe Smoot-Hawley worsened the Great Depression by fueling a cycle of global protectionism. In 1934, Congress passed legislation that undid much of Smooth-Hawley, but the U.S. did not climb out of the Depression for several more years.
No one wants a repeat of that history. But for now, we can only wait and see how this latest tariff battle will unfold.
