How Trump Tariffs Could Raise Costs for Food and Hospitality
President-elect Donald Trump's tariff proposals could significantly affect consumer and business costs as a suggested 25% tariff on imports from Canada and Mexico threatens to raise US grocery prices and create shortages of key products.
These countries currently supply nearly US$86bn in agricultural goods annually, including 90% of avocados consumed in the US, alongside strawberries, orange juice, tequila and beef.
If enacted, avocado prices may soar, given that Mexico accounts for 80% of US imports. Spirits such as tequila and mezcal, integral to popular cocktails like margaritas, could also become more expensive; US imports of these spirits reached US$4.66bn in 2023.
Restaurants may respond by shrinking portions or substituting ingredients to offset rising costs and limited availability.
Procurement experts caution that these changes could result in an inflationary spiral, whilst critics argue that rising costs would disproportionately harm low-income households while also damaging US trade relationships.
With the US-Mexico-Canada Agreement (USMCA) up for renegotiation in 2026, such tensions could complicate future agreements.
Hospitality industry faces supply chain challenges
For the hospitality industry, tariffs could cause disruptions in sourcing furniture, fixtures and equipment.
Trump’s plans for tariffs include a 25% rate on goods from Canada and Mexico and an additional 10% on imports from China, a country pivotal in supplying hotel furnishings.
Alan Benjamin, President of hospitality procurement firm Benjamin West, comments: “If we order today, nothing is going to ship before the inauguration anyway.
"We’ve got our holidays, the Chinese New Year and everything else. None of this is going to be in place. It takes time.”
Procurement professionals, like Neil Flavin of HVS, are advising hoteliers to prepare by securing financing for large purchases before interest rates rise due to inflation.
He explains that while tariffs aim to stimulate US manufacturing, this could backfire by raising prices for US-made goods, creating a domino effect that increases costs throughout the supply chain.
“They do need to plan for the purchasing of goods and, to some extent, services prior to any of these tariffs going into place," he adds.
Domestic manufacturers also face limits in meeting demand. The hospitality sector relies heavily on imported components such as drawer glides, desk chair bases and lighting parts, with around 90% of these items sourced from China.
While Vietnam has absorbed some of the demand shift, its production capacity falls far short of replacing China as a dominant supplier.
Exploring alternatives and preparing for change
Hoteliers seeking to avoid tariffs by sourcing from other countries face hurdles.
Vietnam lacks the space and expertise to scale up significantly, while regions like Cambodia and Latin America are not yet equipped with the necessary infrastructure. For instance, a retail manufacturer’s plan to invest up to US$100m in Cambodia highlights the potential, but development remains slow.
Meanwhile, some products, such as solution-dyed nylon carpets and vinyl wall coverings, are available domestically.
However, for complex designs and labour-intensive finishes required for high-end furniture, US production remains cost-prohibitive.
As Alan notes: “The US lacks the capacity for large-scale production of four- and five-star hotel furnishings.”
The 2005 anti-dumping tariff on Chinese bedroom furniture forced the industry to diversify sourcing. Trump’s broader tariffs during his first term accelerated this shift.
Still, many components originate from China, often assembled elsewhere to bypass direct tariffs.
Hotel brands must adapt to these challenges, or else rising costs could push both hotel owners and guests to cut back, as higher prices reduce disposable income.
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