New Tariffs on Mexico and Canada Will Drive up Inflation Making Food More Expensive - marketwatch.com
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President-elect Donald Trump’s tariff plans on imported goods from Mexico, Canada, and China will raise prices for many consumer products at a time when many Americans are already struggling with inflation.
Food and beverages, an important part of Americans’ budget, could see outsize impact. Imported foods have become an increasingly significant part of the American diet thanks to a strong dollar and consumer preferences for year-round fresh produce.
Between 2008 and 2022, the percentage of food and beverages consumed in the U.S. that are imported increased to 17.3% from 12.4%, according to research from Trace One, a company specializing in regulatory compliance for the food and beverage industry.
Nearly 60% of the fruits and nuts consumed in the U.S. come from abroad in 2022, up from 35.8% in 2008, according to Trace One. The percentage of imported milled grains and oils reached 57% in 2022, and for sweeteners and vegetables, 45% and 40%, respectively.
The U.S. is even more reliant on imports for seafood, with an estimated 70% to 85% of seafood consumed domestically coming from international sources.
Trump said on Monday that his incoming administration plans to impose a 25% tariff on imports from Mexico and Canada, along with an additional 10% tariff on goods from China. The three countries combined supply nearly half of all U.S. food and beverage imports.
Mexico exported over $44 billion in food products to the U.S. in 2023, more than a quarter of which are beer and liquor. On Tuesday, stocks in beer maker Constellation Brands fell sharply, along with distilled spirits companies MGP Ingredients and Brown-Forman.
Mexico is also an important supplier of tomatoes, candies, chocolates, and avocados to the U.S. Meanwhile, Canada exported nearly $40 billion worth of food products to the U.S. in 2023, led by bread and pastries, beef, and canola oil.
Calavo Growers, which sources and distributes avocados to restaurants and stores in the U.S., including those from Mexico, saw its shares tumble 1.8%.
Beyond food and beverages, imports from Canada and Mexico represent about 4.7% of personal consumption expenditures in the U.S. across the board, mostly in the auto industry.
If all of the 25% tariffs are passed along to consumers, it would be expected to increase the core PCE price level by 1.4 percentage points, according to Deutsche Bank analyst Justin Weidner.
In reality, the rate of cost pass-through is more likely between 50% and 75%, says Weidner. That means an expected core PCE of 3.4% to 3.7% in 2025. Walmart CFO John David Rainey has warned that Trump’s tariff promises would prompt the retailer to hike prices. |
