Trump’s fluctuating tariffs force grocers big and small to readjust their operations on the fly
Last week was a whirlwind for retail executives as they responded to on-again, off-again tariffs on Canada, China and Mexico. For grocers especially reliant on Mexican or Canadian imports, the news was a threat to the prices customers see on the shelves.
On Tuesday, President Trump imposed sweeping 25% tariffs on goods from Canada and Mexico, as well as higher taxes on Chinese goods. Within days, he backtracked on some, including pausing tariffs on all imports compliant with the U.S.-Mexico-Canada Agreement (USMCA), which includes food products, until April 2.
Fresh produce from Mexico is of central concern to grocers, but the tariffs would hit a large swath of grocery aisles including anything with packaging containing aluminum, which had its own 25% tariff implemented in February. Unexpected tariffs require grocers to react on the fly by raising prices, shifting suppliers or reconsidering product offerings, leaders of state grocery organizations and other experts told Modern Retail.
“We have the uncertainty of not knowing what each day is going to bring,” said Rob Karr, president and CEO of Illinois Retail Merchants Association. “Maybe there’s a grand strategy to all of this; we’re certainly not privy to that.”
Different grocers and regions face distinct challenges. Minnesota grocers work closely with Canada and, in the winter months, import many of their fruits and vegetables from Mexico, said Patrick Garofalo, president of Minnesota Grocers Association. “Trump turns [tariffs] on, then he turns them off, and so there’s a lot of uncertainty in terms of planning. But in terms of what it means for the average consumer, it’s higher prices,” he said. “Independent grocers are as frustrated by the higher prices as consumers are.”
Some, Karr included, expect tariffs to impact the entire industry fairly uniformly. Others argue independent or regional grocers may find the effects disproportionally difficult to navigate compared to Kroger or Walmart. “I’m not sure it’s easier for Walmart because of their size,” said Dave Marcotte of consulting firm Kantar, who specializes in international retail. “Eventually, they’re going to have to price it in.”
The larger corporations could spread higher tariff costs over their national or international footprint and work directly with importers from different countries.
“[Large grocers] are all about efficiency and leveraging their scale; most of them have centralized buying,” said Nate Rose, vp of communications and public affairs for California Grocers Association. “For independent grocers, they have that agility and more local relationships, and from what I understand, that allows them to look for other suppliers or make things work on the fly and patch their supply chain together.”
According to Garofalo in Minnesota, “it’s an example of big government hurting independent businesses and causing less damage to the mega corporations like Walmart.”
New logistical considerations
David Halliday, associate teaching professor of business strategy for The George Washington University School of Business, said the tariffs mean regional grocers will have to start thinking about their supply chain more deeply than just interacting with one wholesale distributor.
“I think a lot of these smaller places are going to get a hard lesson in supply chain management that they didn’t really think they were going to have to get,” he said. “Your mom-and-pop store is virtually guaranteed to get hit the most,” he said. “They don’t have any control over where their suppliers are buying from, so they probably don’t even know if their berries are coming from Chile, Mexico, Peru or the U.S.”
Halliday said smaller stores may even want to skip the wholesaler and work directly with suppliers to have more control over critical items.
“Let’s say you’re a small version of a Whole Foods, and you need to have berries on the shelf and don’t want any supply chain disruptions. It may be worth incurring the additional 20% or 30% cost,” Halliday said.
California’s Rose said produce is such a large concern because many independent grocers have tried to stand out by having fresh fruits and vegetables readily available. Healthy eating categories have been a growth opportunity for grocers; health-conscious customers spend an estimated $285 billion annually, according to a Dunnhumby report published at the end of 2024. Rose added that, while grocers in California may have more locally grown options for produce than in other states, they still import from other countries.
“Shoppers are used to having avocados and blueberries available at all times a year, and for a reasonable price,” Rose said. “We kind of take that for granted.”
Merchandising and communication strategies
Many grocers have been thinking about how to communicate the impact of tariffs to customers, while others have been highlighting less expensive or more easily available products.
Marcotte said some grocers have proposed putting different cuts of meat or vegetables in the spotlight at stores — for example, showcasing more canned tomatoes instead of fresh tomatoes. But, he admitted, that could frustrate some customers — and it may be difficult for customers to change their palettes, he said.
“Americans are not very good at thinking their way through those things,” he said. “They know what a New York sirloin is, but they have no idea what to do with a beef shank.”
If the tariffs do kick in, Karr said grocers will also have to decide whether they want to put up signage in stores communicating that the price increases aren’t the company’s fault.
“It’s no different than, for example, the egg prices,” Karr said. “People complain to the grocers, but we all know that’s a result of the bird flu.”