More ‘shrinkflation’? How Trump tariffs could reverberate through the food industry

As the threat of another trade war looms over the food and beverage sector, experts say the industry is likely to respond by raising prices or by quietly cutting costs through smaller portion sizes or a reformulation of ingredients.

President Donald Trump is using tariffs to reshape global trade policy, proposing or enacting a flurry of duties on countries including the U.S.’ North American allies. Trump earlier this month ordered a 25% tariff on steel and aluminum imports from all countries, while a 25% duty on imports from Canada and Mexico is set to go into effect as soon as next week. 

Food is one of the industries most vulnerable to the effect of tariffs because the perishable nature of products makes it harder for companies to prepare. Although the vast majority of food consumed in the U.S. is also produced here, companies are reliant on other countries for key ingredients and packaging materials.

Canada is a major supplier of oats and increasingly has been an important partner in cocoa processing, said Tom Madrecki, who oversees supply chain issues at Consumer Brands Association, which lobbies on behalf of some of the largest food companies. Mexico, meanwhile, is a major player in the beverage industry and is one of the biggest suppliers of beer, flavored waters and liqueurs.

Beyond just ingredients, tariffs could also impact other aspects of production like packaging. Canada is a supplier of metal and paper products and a tariff on steel and aluminum would raise prices for canned foods or beverages.

Tight margins in the CPG sector mean food companies don’t have the “ability to capture that tariff and absorb it,” Madrecki said. However, many businesses are unlikely to immediately respond to tariffs by …