Analyzing the Effects of Proposed Tariffs on Grocery Prices
On the campaign trail, President-elect Donald Trump drew attention to the financial burden that rising grocery prices were placing on American families, vowing to alleviate the struggles of households facing high food costs. This commitment likely played a role in his electoral victory; however, many analysts caution that the tariffs he has proposed could actually exacerbate the problem.
As Americans cast their votes, worries about escalating prices and the state of the economy were paramount. Consumers have been dealing with unprecedented inflation levels. The challenges stemming from the COVID-19 pandemic, alongside global issues like the ongoing conflict in Ukraine, have led to significant supply chain disruptions and soaring costs. Predictions from the Consumer Price Index suggest that grocery prices in 2024 could be nearly 25% higher than pre-pandemic levels. A survey conducted by AP VoteCast revealed that 60% of voters who were particularly concerned about the economy favored Trump.
Yet, experts warn that one of Trump’s central campaign promises—a tariff range of 10-20% on all imports, with certain goods from China facing rates as high as 60%—may lead to increased grocery prices for consumers.
David Ortega, a food economist and professor at Michigan State University, remarks, “This policy is likely to backfire. Instead of bringing prices down, these tariffs are almost guaranteed to drive them up.”
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Trump has expressed a desire to implement tariffs on imported goods, including food, to strengthen American manufacturing and challenge what he perceives as unfair trade practices by China. He has insisted that these tariffs will be absorbed by other countries rather than American consumers. “We’re going to be a tariff nation,” he stated at a campaign rally in Mosinee, Wisconsin, in September. “It’s not going to cost you; it’s going to cost another country.”
Nonetheless, experts argue that consumers may ultimately feel the effects at the grocery store if these tariffs are implemented.
Felix Tintelnot, an economics professor at Duke University, clarifies, “Although the law states that the importer pays the tariff at the border, it doesn’t mean that the economic burden remains with them.” Many importers might raise prices to offset the tariffs, ultimately passing those additional costs onto consumers, Tintelnot explains.
Research from the Peterson Institute for International Economics estimates that Trump’s proposed tariffs could cost the average American household approximately $2,600 each year, disproportionately impacting lower-income families. Recently, Walmart’s CEO mentioned to CNBC that the retail giant might have to raise prices on various items if these tariffs come into play.
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The grocery items most likely to be affected include those that are challenging to grow or produce in many regions of the U.S., resulting in a reliance on imports, such as coffee, bananas, and cocoa.
In addition, Ortega warns that tariffs could also influence the prices of domestically sourced goods. Several U.S. manufacturers rely on imported “intermediary goods”—like fertilizers, machinery, and packaging materials—to produce food. “When these products face tariffs, it functions like a tax that raises production costs, which are subsequently transferred to consumers in the form of higher prices,” he explains.
Moreover, tariffs can provoke retaliatory actions from other nations, further impacting costs for American taxpayers. For instance, after the Trump Administration imposed tariffs on China in 2018, China retaliated with tariffs on U.S. soybean imports, leading to a $28 billion aid package for farmers funded by taxpayers.
While the tariffs imposed in 2018 targeted a limited range of goods—such as washing machines, solar panels, and metals—the current tariff proposals are much broader, which may lead to a greater effect on consumers this time. Tintelnot notes, “We can expect more significant price impacts now because a wider variety of goods will be subject to tariffs across the board.”
