The on-again and off-again tariffs have caused confusion and uncertainty within the markets and our global trading partners.
The first 100 Days just recently passed, and it will go down in the history books. 3 weeks in, the administration announced tariffs on Canada, Mexico and China. On February 7, 2025, reciprocal tariffs were announced on all trading partners of the United States. During the three months since being sworn into the office, Tariffs have gone from 10% to a high of 145%. The overall average Tariff Rate for the US Consumer is currently 17.8%, according to The Budget Lab at Yale.
Tariffs aren’t anything new. Previous tariffs existed, implemented by representatives from both political parties. The notable difference now lies in the significant fluctuations of the rates and the speed at which they were and are being enacted. While some countries did come to the table and negotiate once they were announced, many did not. Instead, they placed retaliatory tariffs on all U.S Imports.
Tariffs in general should be seen as taxes or surcharges that don’t get paid by the exporting country but instead by the citizens of the importing one. In theory the practice is supposed to make domestic industry more competitive, but what if there is no preexisting domestic industry? In the globalized world we live in today It makes the basics such as food, fruits and vegetables, hardware tools, electronics, clothes etc. much more expensive.
Many of the necessities a restaurant operator uses on a daily basis are produced overseas. The foil that’s used to cover hotel pans when braising dishes in the oven, may be “produced” domestically but the actual aluminum parent rolls are produced in China. Brazil, the largest supplier of Oranges, has been slapped with a 10% tariff, making the breakfast staple Orange Juice even more expensive. Disposables such as Cutlery, Gloves and Take-Out Boxes have seen similar patterns. Within 3 months, the tariff “surcharge” has changed dramatically. Companies today have a globalized supply chain that provide either all or some of the finalized products they sell.
So how does the uncertainty in global policy affect the restaurant at the local level? Simply put, it affects them on their availability of supply and increases pressure on revenue.
The Supply Challenge.
As we know by now, the swings in tariff rates mean that items will now traditionally cost more. Since the tariff rate is established at the time the item leaves the exporting country and not when it arrives at the importing one, the countries proposed rate could technically change while the item is on the water. Importers, Manufacturers, and Distributors could be under and noncompetitive by the time it gets into their warehouses. Because of this, many just cancelled orders altogether and waited for the dust to settle or went looking for a different solution (this is a challenge in itself).
As one domino falls, so do others afterwards. Empty containers lead to not having enough containers to fill a ship, which leads to Ship Carriers skipping the port. If you haven’t already guessed it, this increases the likeliness of out of stocks and the lead time for your order. We witnessed something similar during the Covid-19 Pandemic in 2020 and 2021. Traditional forecasting gets thrown out the window, and the scramble begins. Allowing those who have buying power to come out on top. One thing to note, as of May 12, 2025, both the United States and China came to an agreement, lowering the tariff rate of 145% to 30%.
This uncertainty will make things such as chemicals, packaging, flatware, meat and produce etc. increase overnight. For those that sell standard or high-end coffee, can expect to feel some of the highest increases since the majority of it is imported.
The Revenue Challenge.
The consumer sentiment in general has been very low. As inflation in the economy changes, so does the consumers’ buying power. If it goes higher, they are able to purchase less with every earned dollar. Although there has been a pause in tariffs, more consumers are expressing anxiety over fears of higher inflation and have begun preparing for the worst. According to a University of Michigan survey which was released this Friday, Consumer Sentiment dropped from 52.2% in April 2025 down to 50.8% for May. As a point of reference, last year at this time the Consumer Sentiment was 69.1%.
“Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers’ thinking about the economy,” Joanne Hsu, director of the Surveys of Consumers, said in the University of Michigan release.
For industry executives, the biggest worry is if consumers aren’t willing to spend their discretionary income eating out at restaurants, and if they do, will they be willing to spend extra on the appetizers and deserts that allow those establishments to maintain profitability.
The looming uncertainty has changed the restaurant landscape indefinitely in the short term and restaurant business operators will need to become proactive and creative in managing their operations from end to end.
