Tariffs have increasingly grabbed the nation’s attention. They’re gobbling up space in the mainstream media, weaving into everyday conversation, and the constant changes are stirring both concern and confusion among restaurant industry leaders already facing a litany of profit-draining pressures.
Looming tariff adjustments on a range of imported food and beverage products (from Italian olive oil and French wine to avocados from Mexico and coffee beans from South American nations like Colombia and Brazil) will impact restaurants across the country. Tariffs will raise costs, pressure already slim profit margins, and disrupt supply chains.
It’s no surprise, then, that tariffs already have many restaurant leaders on edge.
With higher costs and a softer bottom line, restaurant leadership must confront uncomfortable questions about their sourcing of goods, pricing, menu, staffing, operations, and more. Will your signature dishes remain profitable? Will your customers accept rising prices, especially after years of inflation weakening the power of their dollar? Will you need to slice staffing or your menu to control costs?
In an industry operating on thin profit margins even in the best of times, tariffs represent another potential layer of complexity, and a challenge restaurant leaders can’t ignore. Understanding the intricacies of tariffs, like what products are affected, the magnitude of the increases, and the potential long-term implications, is crucial for enduring the challenges ahead.
With a ticking and ever-shifting clock, proactive planning is no longer a luxury but a necessity for surviving and achieving profitability in this muddled economic landscape.
This article will explain the mechanics of tariffs and the specific challenges these increased costs might create. It’ll arm you with practical guidance and accessible solutions to mitigate the risks associated with tariffs, so your business can find stability and success.
An Abridged History of Tariffs
Tariffs—taxes charged on goods purchased from other countries—are nothing new. They’ve been a reality in the U.S. for nearly as long as the country has existed, though they’ve risen in the nation’s consciousness in recent years.
On April 2, President Donald Trump declared a national emergency to increase the nation’s competitive edge in the global marketplace, including an order imposing “responsive tariffs to strengthen the international economic position of the United States.” While the administration announced it would temporarily back off on its reciprocal tariffs a week later, it nevertheless maintained its 10% baseline tariff on most imports, including popular food and beverage items like produce, wine, and seafood.
Compared to the higher reciprocal alternatives, the restaurant industry largely welcomed the temporary reprieve. However, concern remained, summed up by an April 11 story from The New York Times: “Confusion and uncertainty hang over an industry with thin profit margins and few domestic sources for foreign ingredients.”
Tariff proponents say the fees encourage domestic manufacturing and investment while also spurring revenue. Critics, meanwhile, contend tariffs, which vary by product and by the originating country, hurt both consumers and businesses by increasing prices, distorting market competition, and reducing free trade.
An analysis of tariffs introduced by the Trump Administration in 2018 found the U.S. “experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and the complete pass-through of the tariffs into domestic prices of imported goods.”
If higher reciprocal tariffs are installed and hit key food and beverage items, the potential effects present troubling problems for the nation’s restaurants.
Calling tariffs a concern for community restaurants and national brands alike, National Restaurant Association president and CEO Michelle Korsmo expressed concern that tariffs would hike food and beverage costs for restaurants and push prices up for consumers. Korsmo said tariffs are expected to significantly increase the prices of commonly imported items, such as coffee, chocolate, and certain seafood. She also predicted they would impact a broad range of goods that restaurants rely on, such as specialty foods (such as Asian spices and French cheeses) and beverages (including imported wines, specialty beers, and spirits).
How Tariffs Impact Restaurants
The continued threat of tariffs and the uncertainty they bring are understandably sparking unease, even anxiety, across the restaurant industry given how much eateries rely on imported goods, and how much of this situation is out of restaurateurs’ control.
According to the U.S. Department of Agriculture, Mexico, Canada, and the European Union accounted for nearly 60% of all agricultural sales to the United States between 2020 and 2024. Mexico, for instance, supplies roughly one-third of U.S. horticultural product imports, led by fruit, vegetables, and alcoholic beverages. Canada is a large supplier of processed food products (baked goods), meat, vegetable oils, and vegetables. And the European Union provides wine, spirits, and essential oils.
With higher tariffs on these key goods and others, the prices restaurants pay could rise quickly and force operators to act decisively to maintain consistent margins. A 25% tariff on Italian olive oil, for example, means a restaurant’s $400 purchase of this product would likely soar to $500, scorching profit margins. Add in tariffs fueling higher costs on other goods, and restaurants could quickly encounter a bleak financial picture.
Rising tariffs will trigger critical decisions around sourcing alternative items and accurately pricing menus. They’ll also impact guests’ value perception and demand an even more intense focus on spending, inventory management, and food waste. Additionally, accelerating, or wildly fluctuating, tariffs could make it far more challenging for restaurants to predict purchasing budgets and deploy capital, which could complicate everything from staffing to investment in revenue-generating items like catering supplies.
To be certain, tariffs are not exotic policy decisions that exist in a different galaxy. If tariffs climb on items frequently relied upon by restaurants—a reality that currently looms on the horizon—it will directly impact a restaurant’s bottom line, hit operational budgets, and force restaurant leaders to make tough calls to maintain profitability.
That’s why thoughtful, proactive, and strategic action is necessary right now.
Mitigating the Impact of Tariffs
Monitoring the fluid tariff environment through organizations like the NRA or state associations and asking pertinent questions of suppliers and distributors will help you keep your fingers on the pulse of a rapidly shifting economic environment. Maintaining a vigilant eye on tariffs will improve your ability to make thoughtful decisions and respond agilely, whether by renegotiating with suppliers or sourcing goods from local vendors.
Restaurant technology can also empower you to strategize and take informed steps. Back Office software, for instance, offers a range of functionalities to help you manage rising costs and enhance profitability, including:
- Dynamic Recipe Costing: Input your recipes, and the Back Office system automatically calculates plate costs in real-time. Tracking this number can help you make sound, data-driven decisions on menu pricing or marketing promotions of better-margin dishes to optimize menu profitability.
- Impactful Inventory Management: Easily track inventory, spot usage issues, and receive COGS on a weekly basis. Usage trend reports and centralized ordering improve inventory visibility to reduce excess purchasing and protect revenue from rising ingredient costs. You can also identify discrepancies and inefficiencies to minimize waste by analyzing purchase data and sales trends. You can then adjust orders, alter portion sizes, and align inventory with actual consumption patterns to bolster profitability.
- Automated Accounts Payable: With accounts payable automation, your restaurant gains efficiency and lowers invoice processing costs. You can quickly see and respond to vendor price changes, investigate alternatives, or negotiate better prices even in the face of market volatility
The Buyers Edge Platform also includes ArrowStream, a cloud-based supply chain intelligence platform. ArrowStream can further help you address pain points with its specialized solutions, which include daily price visibility and forecasting, contract negotiation capabilities, and access to more than 250 commodities reports.
Don’t Let Tariffs Control You
Tariffs represent a significant and evolving challenge for the restaurant industry. These added costs on key and often-used imported goods threaten to compress restaurants’ already thin profit margins and unsettle established supply chains.
For restaurant leaders, the implications of tariffs appear clear: higher input costs, unpredictable budgets, and the need for nimble responses with respect to product sourcing, pricing, and menu adjustments, all while navigating a landscape of economic uncertainty and customer price sensitivity.
Monitoring the shifting tariff environment, engaging with industry organizations, and leveraging technology will be crucial to mitigating these risks. In a volatile and fast-changing environment, tech solutions such as real-time recipe costing, streamlined inventory control, and accounts payable systems empower you to manage expenses strategically and sustain profitability.
By staying informed and proactive, you can navigate the complexities of tariffs, find stability amid chaos, and position your business for continued success.
