Recently, President Donald Trump suspended his hefty tariffs on Canada and Mexico for 30 days following last-minute negotiations. What does that mean for restaurants? Can we breathe a consolidated sigh of relief?
That all depends on what happens next.
The benefits: Canada and Mexico agreed to stricter border security and are taking steps to reduce fentanyl trafficking. This opioid is responsible for about 70,000 deaths every year due to overdose. The Substance Abuse and Mental Health Services Administration found that restaurants are the most at-risk industry for illicit drug use and substance use disorders.
Mexico is sending 10,000 troops to the U.S.-Mexico border. Canada is mandating several steps against fentanyl trafficking. But where is it really coming from? U.S. customs agents seized about 21,100 pounds of fentanyl at the Mexican border compared to 43 pounds at the Canadian border during the last fiscal year.
On the U.S. side, they are pausing tariffs and doing more to put an end to the trafficking of guns into Mexico. So, what does this mean to the restaurant industry?
Halting Tariffs and the Supply Chain
Tariffs significantly affect the restaurant industry. They can lead to supply chain disruptions and higher food costs. Operators and chefs are left scrambling, optimizing menu selections and pricing. After rising prices associated with inflation, consumers are price-wary, making restaurants adapt and turn to portion control and alternative items rather than increasing prices.
At least, for now, we can expect a 30-day reprieve. This allows operators to source new suppliers, negotiate pricing, and adjust inventory systems. With diners choosing restaurants that embrace sustainable measures and locally sourced ingredients, now may be the ideal time to check out the farmers, ranchers, and seafood suppliers in your area.
Technology & Reduced Operational Costs
Artificial Intelligence (AI) is making its grand entrance into almost every industry, including hospitality. In restaurants, AI algorithms analyze external factors, such as special events, historical data, weather predictions, and seasonality. Then, it predicts the demand, ensuring optimized inventory management, an essential ingredient in today’s uncertain landscape.
Because it can process extreme amounts of data from inventory sensors, POS systems, and sales trends, restaurant operators can make real-time decisions, adjusting menus and orders to reduce waste and meet demand.
The Uncertain Future
In an emailed statement, Michelle Korsmo, president and CEO of the National Restaurant Association, said, “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. As the Trump Administration reevaluates trade policies, we are closely monitoring the impact tariffs will have on food and beverage pricing, domestic sourcing options, and menu adaption.”
Keep in mind that while the Mexico and Canada tariffs are on hold, the 10% tariff on Chinese goods remains. Common ingredients sourced from this area of the world include seafood, vegetables, and processed foods. Is there a bargaining chip in the works? China’s tariff was driven by the belief that the country was sending fentanyl to Canada and Mexico. And, of course, there’s always the possibility of negotiating the ownership of TikTok.
FAQS
Do tariffs affect food prices?
The costs associated with tariffs are usually passed down to buyers and reflect the percentage. So, for Chinese goods, you can expect about a 10% increase. Alternative sources from other countries tend to follow, though not for all affected products.
What are the negative and positive side effects of tariffs?
Because tariffs increase the cost of imported goods, domestic producers are more readily able to compete. This can also help protect U.S. jobs as well as intellectual property.
On the other hand, tariffs increase the cost of goods and often lead to retaliation by the countries the tariffs have been imposed on. China recently announced a retaliatory tariff on U.S. imports and an antitrust investigation into Google.
