How Import Tariffs Affect Food Costs for Restaurants
As trade policies shift rapidly, the foodservice industry is facing rising costs and supply chain disruptions. A new tariff threat from President Donald Trump—potentially imposing a 200% duty on European alcohol—follows the European Union’s recent levies on American spirits. The back-and-forth underscores the volatility of global trade, with U.S. businesses bracing for further economic uncertainty.
Since February, the administration has adjusted tariffs on key trading partners, including Canada, Mexico, and China. These measures have led to retaliatory tariffs on American goods, particularly in agriculture and food products.
Recent Trade Developments
• February 1: Trump imposes a 10% tariff on Chinese goods and 25% on Mexican and Canadian imports.
• February 3-6: Tariffs on Mexico and Canada are briefly paused, while levies on Chinese imports proceed.
• February 10: Steel and aluminum tariffs increase.
• March 4-6: Canada and Mexico face 25% tariffs, with some exemptions for food and auto-related goods.
• March 10-12: China and the E.U. retaliate with tariffs on American farm products, textiles, and appliances.
Impact on Restaurants
For the foodservice industry, a potential 25% tariff on North American food imports is a major concern. The National Restaurant Association estimates these tariffs could cost U.S. restaurants $12.1 billion, with food already accounting for a third of sales costs.
Restaurants aren’t like other small businesses,” said Michelle Korsmo, president and CEO of the Association. “They run on tight pre-tax margins that average 3-5 percent, and they have, on average, 16 days cash on hand.
Canadian imports include key ingredients like wheat, oils, and beef, while Mexico is a primary supplier of avocados, tomatoes, and alcoholic beverages such as tequila and beer. The uncertainty around whether these products will face the full 25% tariff in April leaves many businesses on edge.
Preparing for Uncertainty
Phil Kafarakis, CEO of IFMA, The Food Away from Home Association, warns operators to prepare for potential cost hikes rather than getting lost in speculation.
“The big challenge is the inability to pass those costs fully onto customers without risking traffic declines,” Kafarakis said. With rising labor and food costs, restaurants are already struggling to maintain profitability.
One advantage today is the stronger supply chain strategies developed during the pandemic. Many operators expanded their supplier networks and adjusted menus to accommodate potential disruptions. Encouraging consumers to switch to alternative products could help offset the impact of tariffs.
However, mid-sized and smaller chains remain vulnerable due to limited purchasing power and fewer supplier options. “It’s still a tough supply chain situation,” said Kristin Brooks, president of Buyers Edge’s restaurant procurement unit.
Brooks advises restaurant operators to assess their key ingredient sources. “If your top items aren’t imported from Mexico, Canada, or China, you can start to ease concern,” she said. Still, indirect market effects could lead to higher domestic prices as businesses shift supply strategies.
The Road Ahead
With negotiations ongoing, uncertainty looms. While some tariffs may be delayed or adjusted, consumer confidence is already impacted.
“It’s a tough time right now because uncertainty makes consumers cautious,” Brooks said. “But restaurants are built by survivors. They’ll find a way.”
Still, she anticipates some level of industry attrition. “You may see more bankruptcies, and there will be winners and losers,” she noted. “The key is focusing on controllables—taking care of guests rather than chasing tariffs—because if you lose guests, you lose no matter what.”
