Tariffs Have Restaurant Industry on Edge

Just when we thought we had finally recovered from the repercussions of the COVID-19 pandemic, we’re facing new economic uncertainties in the form of tariffs the Trump administration may (or may not) be imposing on imports from other countries.

Whether you support the president as he tries to remake global trade or are expecting a recession sometime this year, there’s no question this “new world order” will have a huge impact on our businesses.

These on-again, off-again tariffs are, first of all, creating uncertainty as we try to plan our food and beverage budgets for 2025. As of this writing, a 25 percent tariff is still in place on such Mexican imports as tomatoes, avocados, raspberries, bell peppers, beef, beer and tequila. It’s how we have guacamole and tomatoes on salads in midwinter.

As far as Canadian imports, beef, seafood, cereals, legumes, alcohol and maple products are subject to the tariffs. But, as I said, that’s today. The tariff announcements have been so all over the place, who can keep them straight? I’m not sure if sowing confusion is the point of this particular exercise but it is driving my industry crazy! Maybe that’s the point: sowing confusion rather than certainty.

Cost increases are inevitable, and we’ll be facing a difficult choice: Do we, as restaurants, 'eat' those costs and watch narrow profit margins – generally 10 percent or less —  suffer? Or do we pass along the costs to our guests and perhaps lose business?

I do know this: We may be able to grow tomatoes in the U.S., but we can’t grow bananas, coffee or cocoa beans.

Cost increases are inevitable, and we’ll be facing a difficult choice: Do we, as restaurants, “eat” those costs and watch narrow profit margins – generally 10 percent or less —  suffer? Or do we pass along the costs to our guests and perhaps lose business?

Among households earning $50,000 or less a year, dining out is already less attractive because of higher prices, according to TouchBistro's  2025 American Diner Trends Report. When household income is further impacted by tariff-imposed costs, that sentiment may well spread.

Large chains and quick-service restaurants may be able to absorb price increases because they buy in bulk from a variety of sources. A small restaurant will be far less able to absorb those costs without raising menu prices.

Restaurant equipment will be more expensive. U.S. manufacturers produce about $6.4 billion worth of commercial restaurant equipment, and they won’t be subject to tariffs (unless, of course, they export to other countries). China, meanwhile, exported $55 billion in equipment in 2024, and the tariff on Chinese imports, as of this writing, stands at 145 percent.

Unfortunately, this will have an impact on start-up costs for new restaurants which means a lot fewer restaurants will open, and renovations and upgrades of older kitchens will be halted for years.

That said, we’re not helpless as we encounter these new headwinds. Here are some initial thoughts.

Optimize Operations. Use technology to streamline inventory management, ordering and other day-to-day tasks. Look at your supply chain and see if there’s an opportunity to enter into a long-term contract at a lower price or identify alternative sources. Create a consortium  with other owners and operators to take advantage of bulk pricing. Focus on service and training to give your guests the best possible experience.

Grow Local, Dine Local. American farmers export about 40 percent of their total production, mainly corn, soybeans, beef, pork, dairy, nuts (pistachios, almonds) and poultry. But with other countries imposing tariffs on U.S. goods, foreign markets may be less open to them. So if farmers are to stay in business, they have to look for domestic customers. Cultivate food producers near you and promote “locavore” menu items.

Promote Seasonal Menus. Americans are used to getting the same fruits and vegetables 12 months of the year, regardless of whether they are summer, fall, spring or winter crops. With more reliance on American-grown products may come seasonal changes in availability. A seasonal menu is very attractive to many diners and easy to promote to loyal customers.

Talk to Your Guests. Ask them what they’d like to see on the menu and what they like and don’t like about dining with you. You may be surprised by some of their recommendations that are inexpensive for you to implement (like rearranging tables) but increase customer satisfaction and loyalty.

Build Alternate Revenue Sources. Expand offerings of meeting and party spaces, and focus on catering as we get into the holidays later this year. Start a fee-based membership program.

Create a Sense of Exclusivity. That subscription fee could give your guests access to members-only events with special menus and tastings of, say, American wines.

Finally, I recommend that you approach raising menu prices with caution. Consumers have been pressured with rising restaurant prices since 2020, and, while people are still going out to eat, they are doing it more judiciously: forgoing appetizers, cutting back on cocktails and sharing entrees and desserts. All of this is already pressuring your profit margin, and while it might be tempting to raise prices as a quick fix, it may lead to a further drop in demand.

I’ll be interested in seeing how the rest of 2025 plays out — whether, for example, we see fewer new restaurants opening and more closing their doors. It’s sure to be a real roller-coaster ride for the entire industry, and our customers.