Understanding the Impact of Proposed Tariffs on Grocery Prices
On the campaign trail, President-elect Donald Trump highlighted the financial strain that rising grocery prices were placing on American families, promising relief to households struggling with food costs. While this pledge may have contributed to his electoral success, many experts warn that his proposed tariffs could actually worsen the situation.
When Americans headed to the polls, concerns about high prices and the overall economy were at the forefront of their minds. Shoppers have been grappling with unprecedented inflation rates. The challenges posed by the COVID-19 pandemic, coupled with global issues such as the ongoing war in Ukraine, have led to significant disruptions in supply chains and soaring prices. According to the Consumer Price Index, grocery prices in 2024 are projected to be nearly 25% higher than they were before the pandemic. Notably, a survey by AP VoteCast indicated that 60% of voters who expressed strong concern about the economy chose Trump.
However, experts caution that one of Trump’s key campaign promises—a 10-20% tariff on all imports, with certain goods from China facing tariffs as steep as 60%—could increase grocery prices for consumers.
David Ortega, a food economist and professor at Michigan State University, states, “This policy is likely to backfire. Instead of reducing prices, these tariffs are almost certain to cause an increase.”
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Trump has articulated his intention to impose tariffs on imported goods, including food, as a means to bolster American manufacturing and combat what he deems unfair trade practices by China. He has claimed that these tariffs would be shouldered by other countries, not American consumers. “We’re going to be a tariff nation,” he declared at a campaign rally in Mosinee, Wisconsin, in September. “It’s not going to cost you; it’s going to cost another country.”
Nevertheless, experts argue that consumers may still feel the pinch at the grocery store if these proposed tariffs are enacted.
Felix Tintelnot, a professor of economics at Duke University, explains, “While the law stipulates that the importer pays the tariff at the border, it doesn’t mean the economic burden stays with them.” Many importers could raise prices to compensate for the tariffs, ultimately passing those costs onto consumers, Tintelnot adds.
An analysis from the Peterson Institute for International Economics estimates that Trump’s proposed tariffs could cost the average American household around $2,600 annually, disproportionately affecting lower-income families. Recently, Walmart’s CEO mentioned to CNBC that the retail giant might need to increase prices on various items if these tariffs come into effect.
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The grocery items most likely to be impacted include those that are difficult to cultivate or produce in many parts of the U.S., necessitating imports, such as coffee, bananas, and cocoa.
Moreover, tariffs could also influence the prices of domestically produced goods, Ortega warns. Many U.S. manufacturers depend on imported “intermediary goods”—like fertilizers, machinery, and packaging materials—to produce food. “When these products incur tariffs, it’s akin to a tax that raises production costs, which are then passed on to consumers through higher prices,” he explains.
Additionally, tariffs can lead to retaliatory measures from other countries, further affecting costs for American taxpayers. After the Trump Administration imposed tariffs on China in 2018, for instance, China responded by levying tariffs on soybean imports, resulting in the U.S. government providing a $28 billion aid package to farmers, funded by taxpayers.
While the 2018 tariffs targeted a limited range of goods, such as washing machines, solar panels, and metals, the current tariff proposals are much broader, which could mean a greater impact on consumers this time around. Tintelnot observes, “We can anticipate more significant price effects now because a wider array of goods will face tariffs across the board.”
