President-elect Donald Trump’s proposed plan to impose hefty tariffs on imported goods could lead to significant increases in grocery prices, according to economists. While specific details of the tariff plan are still unclear, data from the U.S. Census Bureau and the USDA’s Economic Research Service paint a picture of growing U.S. reliance on food imports. Imported goods accounted for more than 17% of overall food and beverage consumption in 2022, a sharp increase from 13.5% in 2013. This surge reflects a broader trend over the last 25 years, where the value of imported agricultural products has risen five-fold, particularly for consumer-oriented agricultural goods that have become staples in U.S. diets.
The U.S. is notably dependent on foreign produce, with imports making up about 60% of fresh fruit availability in 2021, up from roughly 50% in 2013. Vegetables, too, are increasingly sourced from abroad, with imports accounting for nearly 40% of the U.S. vegetable supply in 2021, compared to 25% a decade earlier. The nation’s growing appetite for imported food is coupled with a sharp increase in the total value of food imports, which reached almost $190 billion in 2023, up by almost 75% over the previous decade. This reliance on international goods, especially produce, has placed the grocery industry in a delicate position as Trump’s tariff proposals could substantially raise prices for American consumers.
Trump has suggested imposing a 10% tariff on all imported goods, with even steeper tariffs on products from China, potentially reaching 60% or higher. While tariffs are primarily seen as a means to generate revenue and protect U.S. industries by making foreign goods more expensive, they ultimately translate to higher costs for consumers. According to economists, retailers typically pass on these additional costs to shoppers, which would result in higher prices across the board, including on imported food items.
Michael Snipes, an economics professor at the University of South Florida, emphasized that tariffs function as a form of taxation on imported goods, much like a sales tax. This would have a clear inflationary impact, particularly for items like coffee, which are not produced in the U.S. David Ortega, a food economist at Michigan State University, echoed Snipes’ sentiments, pointing out that the costs of both consumer goods and inputs used by food companies, such as manufacturing equipment, packaging, and fertilizers, would also increase under the proposed tariffs. These factors would further pressure grocery prices.
Although Trump campaigned on lowering grocery prices, his tariff plan is unlikely to help achieve that goal. Despite a decline in overall grocery inflation since its peak in mid-2022, food prices remain a significant concern for U.S. shoppers. Ortega suggested that the tariffs would likely backfire, driving prices higher rather than providing relief. The increase in import costs would affect not only groceries but also everyday items that are heavily dependent on global supply chains, such as electronics, clothing, and home goods.
Arun Sundaram, senior vice president at CFRA Research, argued that the grocery sector might not face the same level of disruption as other industries that are more reliant on imported goods, such as dollar stores. However, he cautioned that even within the grocery industry, tariffs would still have an inflationary effect. Grocers might need to explore ways to mitigate these costs, potentially by offering smaller packaging or adjusting other aspects of their product offerings.
In any case, the overall economic impact of the proposed tariffs remains uncertain. While some sectors may feel the effects more acutely, it is clear that tariffs on food imports would lead to higher prices for consumers. Grocers will likely face challenges in balancing the rising costs with the need to remain competitive, all while navigating the broader economic consequences of tariff-driven inflation. The true test will be how the industry adapts to these new costs while maintaining affordability for shoppers.
