US “food tax”: How rising tariffs are impacting grocery pricing and sourcing

The recent wave of US tariffs on F&B ingredient imports effectively imposes a “food tax” on grocers, with independent and ethnic grocery retailers feeling the strain most acutely, according to supply chain experts. The implementation of new levies leaves grocers facing rising costs, disrupted sourcing strategies, and mounting pressure to retain consumer trust amid shifting product availability.

“Tariffs on imported goods are usually passed on to the consumer in the form of higher prices, so they very much act as a ‘food tax,’” Amanda Oren, VP of Industry Strategy for Grocery at Relex Solutions, which provides supply chain and retail planning solutions to F&B companies, tells Food Ingredients First.

“The tariffs can also impact domestic producers. If a domestic business relies on imported materials or ingredients, they can make those materials or ingredients more expensive, potentially leading to higher prices for the finished product.”

She advises regional supermarket chains like Vallarta Supermarkets and El Rio Grande in the US, and is tracking how looming tariffs could hit these community businesses hardest. 

Recalibrating sourcing strategies

Oren tells us that produce is likely to be hit the hardest, with up to 4% price increases by Q4 2025. Grocery prices could be impacted by 2-3%, with China, Mexico, and Canada being the most affected food regions. 

“Mexico and Canada are major agricultural trading partners with the US. In 2023, 63% of US vegetable imports and 47% of fruit and nut imports came from Mexico.”

Grocers might resort to product substitutions and shelf reshuffling due to alternate sourcing to mitigate tariff impacts, says Oren.Ethnic grocers are adjusting their sourcing to mitigate the impact of tariffs by diversifying suppliers and prioritizing local sourcing, she notes. They are shifting their sourcing strategies to include countries not yet subject to tariffs or with lower tariff rates, such as Taiwan or South Korea. 

Sourcing products domestically helps grocers reduce reliance on imports subject to tariffs. “This includes partnering with local farmers, suppliers, and distributors.”

Leveraging AI for supply shocks

Independent grocers are also responding to tariff pressures with sharper inventory planning and selective private label strategies. Those with enough capital are developing private label lines sourced from domestic or low-tariff regions to offer competitive pricing.

“But for smaller grocers, private labels may be out of reach, leaving them vulnerable to rising import costs. Even when private labels are viable, grocers are trimming product variety, often limiting categories to one national brand and one store brand, to simplify sourcing and reduce margin risk,” Oren explains.

They are also buying non-perishables like canned goods, baking staples, and dry snacks in advance to stay ahead of tariff-driven disruptions.

“This preemptive strategy helps avoid price spikes but can strain cash flow if demand doesn’t materialize. As a result, many are turning to AI tools and predictive modeling to make smarter decisions, tracking shifting demand patterns, optimizing SKUs, and preparing for potential supply shocks.” 

Meanwhile, grocers are actively communicating with customers about price changes to maintain trust. They use clear signage, separate tariff costs on invoices, and share explanations through emails and social media to help consumers understand why prices have increased or products are unavailable.

Building collective influence

Oren also highlights a rise in policy advocacy to reduce tariff impact through organizations such as The Food Industry Association and National Grocers Association, which generally cover the whole grocery segment.

“There is no question that we will start to see more of this, as there is strength in numbers.

The goal of these organizations is to educate the administration about the implications of policy changes to mitigate the impact.”

“For example, if certain essential food categories are sourced primarily from countries being impacted by high tariffs, these organizations might bring this to the attention of lawmakers in the hopes that these categories might be exempt from the tariff changes.”

Analysts expect higher prices in globally sourced products like cheese and olive oils due to the tax impacts on import costs.

What’s next?

Analysts expect higher prices in specific categories across grocery, with a focus on produce, and internationally sourced products like cheeses and olive oils from Italy.

“We can expect some product substitutions and shelf reshuffling due to alternate sourcing as well as the introduction of more private labels (although that could take until 2026 to show up in meaningful ways on the shelf),” says Oren.

Looking ahead, three signals could determine whether tariff impacts become a short-term disruption or a long-term industry reshaping.

The first is “where do tariffs land, as this has been an ever-changing landscape,” says Oren. The second is whether any exceptions are carved out for specific food categories and/or countries, and how this changes over time. 

For example, under the United States-Mexico-Canada Agreement, many food products from Mexico and Canada like dairy, meat, poultry, and some fruits and vegetables, can enter the US without tariffs. Changes to these rules can affect prices.

Finally, the extent to which companies switch suppliers or increase private label products will show whether tariff impacts are short-term or long-term, she concludes.