Tariffs Could Shake Up Grocery Prices—Here's What to Expect

Grocery prices are on the brink of a shake-up as new tariffs take hold, escalating trade tensions and rattling supply chains. On February 1, President Trump’s administration imposed sweeping import taxes on goods from Mexico and Canada, followed by a March 4 tariff hike on Chinese imports. With two of America’s largest food suppliers, Mexico and Canada, now facing higher costs, retailers are left with a tough choice—absorb the hit or pass it on to shoppers. As businesses sound the alarm and markets react, consumers may soon feel the squeeze at checkout

America’s Food Import Landscape 

On February 1, the U.S. government announced an additional 25% tariff on imports from Mexico and Canada, along with an additional 10% increase on Chinese imports. According to the 2023 data by USDA, the U.S. imported more than $45 billion in agricultural products from Mexico. As a result, staples like avocados, tomatoes, strawberries, and tequila—heavily sourced from Mexico—are expected to see sharp price increases.. Canada, the second-largest agricultural trade partner, contributed over 20% of U.S. agricultural imports in 2023, supplying key staples like beef, pork, and maple syrup—now facing the same 25% hike in tariff, turning once-affordable items into occasional indulgences.

While the USMCA exemption delays the implementation of these tariffs until April 2, uncertainty looms as Canada and China retaliate. China has targeted American agricultural exports, echoing past trade disputes that cost U.S. farmers $27 billion in lost revenue. Canada has imposed 25% tariffs on $20.7 billion worth of American goods and warned of further measures if tensions persist. Mexico has also announced countermeasures if this continues. As American consumers grapple with this economic uncertainty, a fundamental question emerges: Will shoppers simply absorb these costs in the form of higher prices, or will intensifying trade tensions fundamentally alter consumer behavior in an already volatile retail landscape?

Who Pays the Price?

Tariffs are government-imposed taxes on imported goods, designed to make foreign products more expensive and encourage domestic consumption. However, these costs aren’t borne by exporting countries—they fall on the companies importing the goods into the U.S., which then filter through the supply chain, ultimately impacting both businesses and consumers.

Major retailers like Walmart and Kroger benefit from their scale, enabling them to negotiate better deals with suppliers or adapt pricing strategies. However, even they are not entirely shielded from cost pressures. In November 2024, Walmart CFO John David Rainey told CNBC that while the company is committed to keeping prices low, some cost increases would inevitably need to be passed on to customers. “We never want to raise prices, but there will be cases where prices will go up,” he explained. For smaller grocery retailers, the challenge is even greater. They must choose between raising prices and risking customer loss or absorbing the higher costs, further tightening their already slim profit margins.

Adapting to a Shifting Trade Landscape

As tariffs return to the policy spotlight, grocery retailers face increasing price volatility, supply chain disruptions, and shifting consumer spending patterns. With new trade restrictions targeting key import partners and the cost of imported goods rising, grocers may be forced to reassess their current strategies. Many retailers will need to explore alternative supply channels, including strengthening domestic supplier relationships and diversifying sourcing to reduce reliance on high-tariff imports.

For shoppers already burdened by rising grocery costs, the timing couldn’t be worse. A recent McKinsey article found that in early 2025, 51% of low-income households had cut back on meat and dairy—up from 40% late last year—a trend likely to accelerate as tariffs disrupt food supply chains. 

Conclusion 

Tariffs have a way of reshaping the grocery industry, and history makes that clear. Past trade disputes slashed exports, squeezed food producers, and forced retailers to navigate rising costs. The 2018 trade war with China, for example, sent commodity prices tumbling, leaving American farmers billions in the red—only partially offset by government aid. Now, with a fresh wave of tariffs taking effect, the question remains: Will supply chains adjust fast enough to absorb the impact, or will consumers once again feel the sting at checkout?