Trump tariffs to stoke US food inflation despite pledge to lower costs

U.S. consumers grappling with soaring prices for beef and eggs will face even higher costs for meat, vegetables and fruit if President Donald Trump imposes tariffs on Canadian and Mexican imports, economists and food industry executives said.

Consumers have struggled with high inflation since the COVID-19 pandemic and voted for Trump in part due to discontent with higher prices. Trump pledged to bring down costs for ordinary Americans.

The White House said on Friday that the new tariffs on Canada and Mexico will take effect on 1 February, denying a Reuters report that they would be delayed until 1 March.

Tariff-related price increases would hit consumers' wallets at a time when beef prices are near record highs and costs for eggs have climbed after bird flu eliminated millions of egg-laying hens. Bird flu cases in dairy cows have also reduced milk output in top-producer California.

Shortly after taking office last week, Trump set the 1 Feb. deadline for imposing 25% tariffs on imports from Mexico and Canada unless the countries move to halt flows of illegal immigrants and the deadly opioid fentanyl into the U.S. He also said he would impose a 10% tariff on Chinese goods over that country's role in the fentanyl trade.

"Any increase in expenses in the form of a tariff subsequently serves as a 'food tax' on consumers for imported products and is not a workable solution," National Grocers Association spokesman David Cutler said.

Tariffs again have been dominating the headlines all signs point to the fact that they are likely to go into effect tomorrow or this weekend.

Tariffs are paid by importers, not exporters, who either pass on the costs to consumers or face lower profits.

The Trump administration says its planned tariffs will not cause higher prices in the U.S. Vice President JD Vance said on Sunday that consumer prices will start coming down, but it might not happen immediately.

Supply disruptions due to tariffs would highlight how reliant the nation has become on its neighbors for feeding its population.

The United States imported $195.9 billion of agricultural goods from suppliers around the world in 2023, according to U.S. Department of Agriculture and U.S. Customs data. That included nearly $86 billion from Mexico and Canada, the top two suppliers representing 44% of the total.

Up to 40% of fresh produce sold in U.S. food stores is imported, according to the National Grocers Association

"We import most of our fresh fruit and vegetables from Mexico and Canada so you will definitely see inflation on those products," said Rob Fox, an economist and director of CoBank's Knowledge Exchange.

"These are products that are not easily replaced," he said. "I can't go out and plant tomatoes in Illinois in January and hope to replace them."

About two-thirds of U.S. vegetable imports and half of its fruit and nut imports come from Mexico, according to the USDA. That includes nearly 90% of its avocados, as much as 35% of its orange juice, and 20% of its strawberries.

Avocados from Mexico, a marketing arm of Mexico's avocado industry, was shipping 52 to 53 million pounds of avocados each week to the U.S. in December, CEO Alvaro Luque said. That climbs to more than 70 million pounds ahead of the U.S. Super Bowl football game which this year is on 9 Feb, he said, highlighting America's demand.

The threat of tariffs alone can be inflationary, said David Ortega, an economist at Michigan State University.

"Food companies are scrambling to come up with contingency plans in terms of where they might source these products should these tariffs come into place, and that adds cost to their operations," he said.

HIGHER BEEF PRICES

The U.S. normally imports more than 1 million cattle from Mexico annually, though Washington has blocked shipments since late November due to the discovery of a pest in Mexico.

Canadian cattle also are shipped into the U.S. to be fattened and slaughtered. Tariffs or trade disruptions could affect products ranging from ground beef to steaks, analysts said.

Uncertainty over tariffs has encouraged U.S. meat buyers to lock in purchases of domestic supplies or imports before 1 Feb, said Bob Chudy, a consultant for beef importers.

"If it goes through anything like threatened, it will definitely push U.S. beef prices up significantly higher," he said of tariffs.

U.S. retail prices for ground beef hit a record high of $5.67 per pound in September and were a little below that last month, according to the Bureau of Labor Statistics. Prices for the hamburger meat are up 42% from four years ago.

U.S. beef demand hit a 38-year high in 2024 despite record prices, said Lance Zimmerman, senior animal protein analyst for RaboResearch Food & Agribusiness.

An increase in imports and heavier cattle weights have compensated for smaller domestic herds.

U.S. cattle inventories dropped to their lowest in decades after drought reduced grazing lands. It takes roughly two years to raise a new cow to be ready for slaughter.

"Beef prices are high right now and trade disruptions can introduce some chaos into the markets," Zimmerman said.