The pledges by Canada and Mexico to hit back against Donald Trump’s import tariffs have sparked fears of a trade war leading to rising prices for food and beverage products.
Trade associations representing food and drinks businesses on both sides of the US-Canada border have warned of disrupted supply chains and increased costs.
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Tariffs of 25% on goods imported into the US from Canada and Mexico are due to be implemented from tomorrow (4 February) unless talks due to take place today between the leaders of the three countries result in a compromise being agreed.
In the meantime, Canada and Mexico have both responded by saying they will introduce retaliatory 25% tariffs on US imports.
The US and Canada are major trading partners for shelf-stable food and alcohol. Canada is the number one exporter of grain, livestock, meat and poultry to its neighbour to the south. Meanwhile, Mexico is the largest supplier of fruit and vegetables to the US.
Trump has also announced an additional 10% tariff on imports from China, which has met with “strong opposition” from Beijing. China has yet to announce its response.
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By GlobalDataThe US President has also told the UK broadcaster the BBC that the US will “definitely” impose trade tariffs on the EU. He suggested a deal “can be worked out” with the UK instead of the introduction of tariffs.
The tariffs – which Trump has linked to his ‘America First’ approach, illegal immigration and his claim that fentanyl, a deadly opioid, is being imported into the US via its southern and northern neighbours – have long been threatened by the newly-inaugurated US President. The announcement of their introduction has generated a predictably strong response from Canada and Mexico.
A statement from trade body Food, Health & Consumer Products of Canada (FHCP) said: “We are deeply concerned by the US decision to impose 25% tariffs on Canadian goods and 10% on energy. These measures will disrupt food, health and consumer product supply chains, raising costs for businesses and consumers on both sides of the border.”
In a joint statement, the Distilled Spirits Council of the US, the Chamber of the Tequila Industry and Spirits Canada said: “We are deeply concerned that US tariffs on imported spirits from Canada and Mexico will significantly harm all three countries and lead to a cycle of retaliatory tariffs that negatively impacts our shared industry.
“The North American spirits sector is highly interconnected. Many companies own brands in all three countries, contributing positively to local economies. Certain spirits, such as bourbon, Tennessee whiskey, Tequila and Canadian whisky, are recognised as distinctive products and can only be produced in their designated countries. The imposition of a tariff not only negatively impacts trading partners but also harms domestic industries.”
In the US, Leslie Sarasin, president and CEO at industry association FMI – The Food Industry Association said the tariffs could put pressure on prices paid by shoppers.
“New tariffs will also drive up the cost of doing business and food prices at a time consumers are extremely concerned about prices,” Sarasin said. “With 1.6% retail and 7.5% food manufacturing net margins, tariffs will put incredible pressure on our members.”
Retaliatory measures against Trump’s tariffs are likely to include banning the sale of US alcohol in certain Canadian provinces.
Ontario Premier Doug Ford said that, starting tomorrow, the province is removing American products from retail shelves and restaurants. British Columbia Premier David Eby has directed the country’s liquor board to purchase wines exclusively from “blue” – Democrat-controlled – US states.
Mexico, which in 2023 overtook China as top destination for US exports, is also preparing its response.
News agency Reuters, quoting sources familiar with the matter. reported the country has been preparing possible retaliatory tariffs on imports from the US, including pork, cheese and fresh produce.
Business groups have also been quick to denounce Trump’s move.
US Chamber of Commerce senior vice president and head of international John Murphy said: “The President is right to focus on major problems like our broken border and the scourge of fentanyl but the imposition of tariffs under IEEPA [the International Emergency Economic Powers Act] is unprecedented, won’t solve these problems, and will only raise prices for American families and upend supply chains.”
Dr. Sylvain Charlebois, a professor and researcher of food distribution and policy at Dalhousie University in Canada, suggested grocery prices in Canada could rise as soon as this week.
He suggested that, aside from shelf-stable food products, fruit, fruit juices and vegetables will be impacted by the levy as well as beer, wine, bourbon, and other spirits.
“These products will either become more expensive or stop being imported into Canada altogether,” he said.
He suggested the bigger concern is a weaker Canadian dollar. “Tariffs will drag it down, making imported food even more expensive,” he said.
