Import tariffs are taxes imposed on goods imported from other countries. While these tariffs help protect local industries and balance trade, they can make imported goods more expensive. 

For restaurants, this could mean higher food costs, supply chain disruptions, and challenges in menu pricing strategies.

In this article, we we’ll take a look at how tariffs may impact food costs in restaurants. We’ll also discuss restaurant supply chain management, the overall dining experience, and practical steps to manage costs and keep restaurant operations running smoothly.

What Are Tariffs?

A government imposes a tariff as a tax on goods imported from other countries. Governments use tariffs for a variety of reasons, such as protecting domestic businesses, addressing trade imbalances, and generating revenue. 

These taxes can help some areas, but they often increase the cost of goods. This is especially true for restaurants that depend on imported ingredients.

How Tariffs Are Determined

Tariffs are determined based on trade agreements, international relations, and economic policies. They can increase the cost of food ingredients from abroad, making it more expensive for restaurants to source key items. 

Tariffs are also used to:

• Protect local industries by making foreign products more expensive
• Encourage consumers to purchase domestically produced goods
• Address trade deficits or the imbalance between imports and exports

Non-Restaurant Examples

Tariffs don’t just affect the food industry. Tariffs on American and Canadian food items, like steel and aluminum, have affected industries such as construction and automotive. Similarly, tariffs on electronics have driven up the cost of consumer goods.

The ripple effect from these tariffs also affects the restaurant industry. Even small increases in food prices can greatly impact a business.

Current Tariffs Affecting the Food Industry

The restaurant industry faces unique challenges because of tariffs. Many commonly imported food items are affected, including:

• Seafood from Asia (USITC Data on Seafood Imports).
• Wine and cheese from Europe (European Tariff Information).
• Produce from Mexico and Canada (USDA Trade Reports)
• Specialty foods like olive oil, truffles, and spices (USTR Specialty Food Updates).

These tariffs on food from America and Canada can raise ingredient prices. This may push a restaurant to increase their menu prices or change how they source ingredients to avoid extra costs. This affects food cost management in restaurants, which often leads to difficult decisions regarding pricing and sourcing.

7 Ways Import Tariffs Could Affect the Restaurant Industry

1. Purchasing Inventory Becomes More Expensive

When tariffs raise the price of imported food, restaurants may face higher inventory costs. Ingredients such as seafood, specialty oils, or spices may see price hikes. 

This can make cost management in restaurants more difficult, especially when trying to keep food costs manageable.‍

2. Limited Access to Specialty and Off-Season Ingredients‍

Tariffs may heavily affect certain ingredients that are seasonal or unique to specific regions. For instance, specific wines or cheeses from Europe may become too expensive to keep on the menu regularly.

Seasonal menu planning is more important when tariffs limit access to off-season ingredients and cause possible inventory shortages. These ingredients are often harder to find locally. 

Eating seasonally in restaurants helps reduce imported goods. It also meets the rising demand for fresh, sustainable ingredients.

3. Menu Consistency Becomes Difficult‍

Fluctuating food prices and availability can make it difficult to maintain a consistent menu. If the ingredients you often use get more expensive or harder to find, you might need to change recipes or use substitutes. This is especially problematic in fine dining, where customers expect a consistent experience. Implementing a flexible menu pricing strategy is essential to cope with these challenges and maintain customer loyalty.

4. Increased Dependence on Local Suppliers

To avoid higher import costs, many restaurants may turn to negotiating with local suppliers. While this supports the local economy and reduces supply chain delays, it can also limit menu options.

Domestic food sourcing may not provide the same variety or specialty ingredients that imported goods offer. Farm-to-table restaurants can benefit from using local ingredients. However, this often leads to fewer types of ingredients available. It’s crucial to having a strategy around choosing vendors.

5. Shrinking Profit Margins

With the increase in food costs, restaurants may face shrinking profit margins. Raising menu prices may alienate customers, while keeping prices stable could hurt profitability. As a result, restaurant cost management becomes crucial to maintaining balance between affordability and profitability. Adjusting to the impact of tariffs requires careful planning and strategic decision-making in menu engineering.‍

6. Supply Chain Delays Disrupt Operations

Tariffs can cause delays in the transportation and delivery of goods, especially perishable items like seafood and produce. If customs delays these goods or if they get stuck in transit, the goods may spoil before arrival.

Restaurant supply chain management needs to adjust to these delays. You can achieve this by finding new suppliers or changing ordering practices. These changes will help account for longer lead times.‍

7. Sourcing New Suppliers Requires Time and Effort

Finding alternative suppliers, both domestically and internationally, requires significant time and resources. This involves researching new suppliers, negotiating pricing, and adjusting inventory systems. Managing the impact of tariffs on restaurant owners can distract them from other important parts of running a restaurant. This is especially true for smaller businesses that may already be struggling.

5 Ways Restaurants Can Combat Rising Costs Amid Proposed Tariffs

1. Adjust Menu Prices Without Losing Customers

Increasing menu prices is one way to combat rising food costs. Implement menu pricing strategies that align with their target audience’s expectations. Raising prices on premium menu items or highlighting the quality and uniqueness of certain dishes can justify the increase. Transparency is also key—customers appreciate knowing why prices are going up, especially when tariffs are the cause.

2. Diversify Suppliers and Find Sourcing Alternatives‍

Building relationships with multiple suppliers can help restaurants offset some of the negative effects of tariffs. By expanding your supplier network and sourcing both locally and globally, you can lower price increases. This also helps reduce the risk of supply chain problems.

You can reduce supplier pricing challenges by working with trustworthy partners. They can provide better prices and flexible terms.‍

3. Embrace Seasonal Menus

A seasonal menu offers diners fresh, locally sourced ingredients and helps to reduce costs by utilizing readily available and abundant produce. By focusing on seasonal ingredients, restaurants can decrease their reliance on imported goods, thereby optimizing food costs. Additionally, seasonal dining appeals to consumers seeking sustainable, farm-to-table dining experiences, enhancing a restaurant’s appeal and maintaining its competitive edge.

4. Reduce Food Waste Through Effective Inventory Management

Effective inventory management enables restaurants to minimize food waste and optimize food costs. By closely monitoring stock levels and usage patterns, restaurants can order ingredients with greater precision, avoiding overstocking or shortages. Advanced inventory management tools, like MarketMan, can further streamline the ordering process, ensuring that costs are kept in check and operations run smoothly.‍

5. Lower Operational Costs Through Technology and Automation

Investing in technology and automation can significantly reduce costs and enhance operational efficiency. MarketMan enables restaurants to monitor their inventory in real-time, offering valuable insights into food costs and waste reduction. Automation streamlines various aspects of restaurant management, including labor, ordering, and inventory, thereby optimizing cost management. This shift allows restaurants to enhance the customer experience while effectively managing their expenses.

“We've upgraded our technology massively. We went from predominantly on-premise hardware and software to pure cloud. We now do weekly stock takes at every location. We can now also calculate Cost Of Goods Sold and variances in minutes and with much more accuracy than previously by using MarketMan,” stated  Paul Sarlas, Managing Director at ATFC, Ltd.

Import tariffs can have a significant impact on the restaurant industry, raising food costs and disrupting supply chains. By understanding how tariffs affect the restaurant industry, restaurants can take action and prepare ahead.

Taking proactive steps can help restaurants stay profitable. This allows them to keep providing high-quality dining experiences, even with possible tariff challenges.

Control food costs, track inventory price changes, and reduce COGS with restaurant management software. MarketMan is a cloud-based restaurant management and purchasing solution that automates back-of-house operations, empowering businesses of all sizes with real-time reporting and strategic insights to drive growth and profitability. Ready to see it in action? Book a demo today.