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Grocery Shoppers Brace for Potential Price Hikes Due to New Tariffs
Consumers purchasing groceries are likely to experience the effects of the administration’s newly implemented tariffs before the end of April. The initial impact will probably be felt most acutely in grocery sections where products turnover rapidly, such as fresh produce and seafood.
Immediate Impact on Produce Aisle
Food market analysts indicated on Thursday that shoppers should anticipate modest price increases in the produce department. Everyday items like bananas from Guatemala and grapes from Peru are expected to become slightly more expensive, as these imports will be subject to 10 percent tariffs when the new duties take effect this Saturday. A subsequent set of reciprocal tariffs targeting 57 countries is scheduled to follow on Wednesday.
Seafood Counter Faces Significant Price Surges
The seafood counter may present even more pronounced price fluctuations. Supermarkets routinely sell substantial quantities of shrimp from Vietnam and India. The administration has imposed significant reciprocal tariffs on these imports: 46 percent on Vietnamese shrimp and 26 percent on Indian shrimp.
Rising Costs for Staple Goods
According to analysts, price increases are anticipated soon for basic goods such as sugar and coffee. Coffee prices are already near historic highs, and specialty coffee beans could eventually cost consumers between 10 percent and 35 percent more than pre-tariff prices, according to projections from bean purchasers.
Impact on Private Label Brands
Since the pandemic, grocery retailers have broadened their selections of budget-friendly private-label products. Consumers have embraced these as a means to manage inflationary pressures, but tariffs are poised to elevate costs for these items as well.
Challenges in Predicting Overall Food Price Changes
“These private label brands served as a refuge for consumers,” stated Keith Daniels, a managing partner at Carl Marks Advisors, an investment bank specializing in the food and grocery sectors. “Now, that benefit may diminish.”
However, Daniels and some food industry executives note that the complexity of the food supply chain makes it challenging to predict the precise impact of tariffs on overall food prices. A significant portion of food available in the United States is processed abroad, or includes components and packaging sourced from multiple countries. This intricate web makes it difficult to isolate the tariff effect.
It is expected that a portion of the tariff costs will be absorbed by retailers rather than passed directly to consumers. Businesses are likely to reassess their pricing strategies and evaluate the duration of their existing inventory already within the country.
Potential for Price Manipulation and Lack of Transparency
Despite potential cost absorption, Errol Schweizer, a veteran of the grocery industry and publisher of The Checkout Grocery Update newsletter, suggests that the likelihood of price gouging or other forms of market manipulation is elevated.
“Consumers will lack clarity on whether prices are justified or if they are being exploited,” he cautioned.
Administrative Burdens and Implementation Delays
Across all levels of the food industry, simply managing the increased administrative paperwork associated with tariffs will require time. Large retailers like Walmart mandate suppliers to provide advance notification and comprehensive documentation for any price increases. However, numerous companies are still in the process of establishing systems for tracking and remitting tariff payments.
Jeff Dunn, the executive chairman of Generous Brands and Bolthouse Fresh Foods, projected, “It will take up to a year for these costs to fully permeate the system, but within 12 months, consumers will undoubtedly observe higher prices across the board.”
Differential Impact on Large and Small Food Producers
Major food manufacturers, such as Mondelez and Kraft Heinz, are better positioned to withstand the economic impact of tariffs compared to smaller businesses with narrower operating margins. For these smaller entities, navigating the new tariff regime will likely necessitate rapid implementation of creative and strategic cost-reduction measures to remain competitive.
On Thursday, Paleovalley, a Colorado-based company specializing in meat snacks and other products, was actively working to minimize the potential consequences of tariffs on imported monkfruit purée, a key ingredient that is challenging to procure from alternative sources.
Uncertainty and Strategic Adjustments for Importers
Ethan Frisch, co-founder and co-chief executive of Burlap & Barrel, a spice importer sourcing from small producers in 30 countries, is facing considerable uncertainty. A shipment of cinnamon from Vietnam is already en route, with farmers and the shipping company already compensated. However, Frisch remains uncertain whether tariffs will apply to this shipment.
Businesses Curtail Expansion Plans Amid Tariff Concerns
Due to these types of uncertainties, Frisch has decided to postpone the introduction of certain products originally planned for later in the year, including a spice-themed Advent calendar featuring samples from around the world in festive packaging manufactured in China.
Yun Hai, a specialty food retailer in New York City, directly sources goods from rice farms, soy sauce producers, and mills in Taiwan, then ships them in bulk to supply grocery stores and restaurants nationwide. These imported foods, many of which lack domestic substitutes, now face a 32 percent tariff.
“We are on the front lines as the importer,” explained Lisa Cheng Smith, the company’s chief executive. Her most recent shipment arrived on Tuesday, just prior to the tariff announcement. She is now exploring innovative cost-reduction strategies to offset the 32 percent tariff without jeopardizing the viability of her business.
Retailers Hesitate to Immediately Raise Prices
“We are not going to panic and simply raise our prices immediately,” Smith stated.
Consumer Stockpiling Advice
In the interim, Sam Silverstein, a reporter for the trade publication Grocery Dive, suggests that consumer stockpiling may be a prudent strategy.
“Stockpiling avocados presents more challenges than stocking up on canned soup,” Silverstein noted, “further highlighting the wisdom of purchasing shelf-stable items when offered at favorable prices.”