Many Americans have been struggling with the price of groceries since the pandemic. In fact, the U.S. Economic Research Service reported a 23.6% increase in food prices from 2020 to 2024. This is higher than overall inflation, which was at 21.2% during this period (and which was already near a record high).
Surging prices on staples like eggs hit especially hard because, while it is possible to try to trim your grocery budget, there's only so much you can do to cut back on essentials.
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Unfortunately, things are not likely to get better any time soon. In fact, things are very likely going to get worse. That’s because tariffs are scheduled to go into effect on almost all U.S. trading partners. These tariffs were originally slated for August 1, but have now been pushed back to August 7.
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Tariffs are taxes on imported goods, which are inevitably passed on to consumers. If there are higher import duties due on the food you eat, you are going to pay more for it. In fact, you are going to pay significantly more for many kinds of foods because it’s not that easy to just switch to sourcing certain items in the U.S.
So, how will tariffs affect your grocery budget, and which items will see the biggest price surges? Let’s take a look.
How much more expensive are your groceries going to get?
The Tax Foundation took a close look at how the new tariffs are going to impact food prices, and it is not good news. President Trump's tariffs are expected to impact around 75% of the U.S. food imports. You don't need to be a math expert to understand that is the majority of the food that we eat.
USMCA-covered goods are not subject to the tariffs, so the good news is that around 63% of agricultural imports from Mexico and Canada can continue to enter the country without added fees being imposed.
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However, food imports not covered by USMCA will face new tariffs of 25%, with scheduled increases to go as high as 35% or 30% for Canada and Mexico. Since the administration has already put tariffs in place totaling between 10% and 30%, some countries’ imports will now face tariffs exceeding 30% if the reciprocal tariffs end up going into effect on August 7.
Consumers will largely have to cover a substantial added cost, given that the grocery business' profit margin is pretty thin, making it difficult for others up the supply chain to eat the cost.
Which foods will be hit hardest by tariffs?
The Tax Foundation explained that not all foods are going to be equally impacted by the new tariffs. The top five foods that are expected to be hit hardest, in order, include:
- Liquor and spirits
- Baked goods
- Coffee
- Fish
- Beer
Unfortunately, in many cases, these items can’t really be swapped out in a one-for-one exchange with products made in the U.S.
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If you love your Russian Vodka or your Brazilian coffee, for example, you may not want to swap out these specialized products for U.S. versions that you find to be inferior. Unlike some products, food and drink items aren’t just interchangeable.
Unless a further change is made to tariff policy, which isn’t an impossibility given the many shifts that have occurred, consumers had better start getting ready for this unpleasant reality.
August 7 is going to be here before you know it, and your grocery bills may just get a lot bigger when the fateful date arrives.
