President Trump’s on-again, off-again pronouncements on tariffs on goods from Mexico have food and beverage manufacturers scrambling, but the lack of certainty makes it difficult to plan a response, experts told The Food Institute.
Tariffs on goods from Canada and Mexico had been set to take effect March 4, but Trump paused most and said instead he would be concentrating on reciprocal tariffs starting April 2, rather than a blanket 25% on everything, to better comply with the U.S.-Mexico-Canada trade agreement signed in 2018.
The news prompted President Claudia Scheinbaum of Mexico to organize a giant fiesta in the capital to celebrate.
“This is an achievement for everyone,” Scheinbaum told the crowd, adding that she had had a very “respectful” conversation with Trump.
The decision marked the second such delay since the president took office Jan. 20.
“Goods we import from Mexico include fresh produce items like tomatoes, avocados, and peppers. Additionally, imported beers and spirits such as tequila and mezcal are likely to be impacted by tariffs,” Jon Clune, senior director for industry solutions at o9 Solutions, told FI.
“At this point in time, it is difficult to predict exactly how much more expensive these goods will get, as pricing is dependent on several factors, including when tariffs are imposed, the industry’s ability to offset increased import prices, and consumer demand for these products.”
Meanwhile companies are making contingency plans.
“There will inevitably be winners and losers,” said Eric Brass, co-founder of Tequila Tromba. “When it comes to tariffs, the details will be crucial in determining what is exempt and what will be affected. I would be surprised if there were a blanket tariff on everything.”
Food Dive reported that Mondelēz, Conagra and Diageo are among packaged food companies that already have begun repositioning.
Experts predict the tariffs will be targeted but advise companies to look for alternative suppliers to mitigate increased costs.
“[W]hat’s really interesting is it will give companies an opportunity to reassess their operations and find efficiencies and get better. Sometimes when your feet are to the fire, you will find a way reduce costs to help offset the impact of the tariffs,” Brass said.
Dirk Van de Put, CEO of Mondelēz International, told Food Dive the company would not be doing its job if it failed to prepare for tariffs. Van der Put said the company plans to use promotions for some of its brands like Oreo and Ritz, hoping that higher volumes will offset higher costs.
A recent survey by Numerator indicated 76% of consumers anticipate they will need to change their shopping habits as a result of tariffs, likely turning to sales and coupons to mitigate expected price hikes.
“The immediate solution for most [companies] will be price increases as companies scramble to adjust supply chains, but a long-term strategy must include diversification,” Javier Palomarez, CEO at United States Hispanic Business Council, told FI.
“They must seriously reconsider production locations and explore lower-risk alternatives with similar labor benefits, such as Latin America, while also investing in efficiency improvements. … [B]rands that can quickly and strategically adapt will be best positioned to weather this climate in terms of maintaining market share and profitability.”
Oisin Hanrahan, CEO of Keychain, said since tariffs initially were announced, “we’ve seen a noticeable uptick in U.S.-based companies re-evaluating their supply chains and exploring domestic manufacturing options.
“In preparation, we’ve seen some brands start to stockpile ingredients, while others are shifting production to avoid regions impacted by tariffs.”
“We’d expect companies based in Mexico to take the same steps,” the CEO added.
“The challenge here is that supply chains don’t change overnight – brands that have a strong handle on their manufacturing partners and sourcing options will be in the best position to adapt quickly. Brands that move now to diversify and optimize their supply chains will be best equipped to handle whatever comes.”
Palomarez noted there might be a solution for “small and emerging brands that lack the liquidity to forecast demand and pre-order products to soften the impact.” He said they might band together, allowing them to “compete in volume and find efficiencies that would be difficult to achieve alone.”
