National Restaurant Association Warns of $12B Blow to Industry from Tariffs; Slash Profits by 30%
A proposed 25% tariff on food and beverage imports from Mexico and Canada could cost U.S. restaurants more than $12 billion, delivering a massive financial blow to an industry already battling inflation and labor costs, according to the National Restaurant Association (NRA).
In a letter to President Donald Trump, the NRA urged the administration to exempt food and beverage products from the tariffs, warning that such a move could slash the average small restaurant operator’s profits by 30%.
“These numbers are staggering for an industry that operates on razor-thin margins,” said Michelle Korsmo, President and CEO of the NRA in a Restaurant Business article. “Restaurants aren’t like other small businesses. They typically run on 3% to 5% pre-tax margins and have an average of just 16 days of cash on hand. Sudden cost increases of this magnitude aren’t sustainable.”
Tariffs Set to Take Effect as Industry Faces Record-High Costs
Trump, who campaigned on using tariffs as a trade strategy, announced plans to impose a 25% import tax on all goods from Canada and Mexico. Initially set for February, the tariffs were postponed but are now expected to take effect next week, according to media reports.
This comes at a time when the restaurant industry is poised for growth, with sales projected to hit $1.5 trillion and employment expected to reach 15.9 million people by the end of 2025. However, operators remain cautious due to rising food and labor costs, supply chain disruptions, and staffing challenges.
The financial strain is real:
- Food costs have jumped 35% over the past four years.
- Labor costs have increased 36% in the same period.
- Many restaurants have already raised menu prices to offset these expenses, but further hikes could drive away customers.
Key Imports at Risk: Beer, Avocados, Beef, and More
A 25% tariff would significantly impact restaurants’ ability to afford essential ingredients. The U.S. heavily relies on Canada and Mexico for many key food and beverage imports:
- Canada supplies beef, baked goods, and cooking oils—all staples in restaurant kitchens.
- Mexico is a leading source of avocados, tomatoes, and other produce, as well as beer, tequila, and other alcoholic beverages.
Unlike other industries that may shift sourcing, the NRA notes that many of these products simply can’t be produced year-round in the U.S. due to climate limitations, making imports essential for meeting demand.
Why Restaurants Can’t Just “Raise Prices”
One of the biggest concerns for restaurants is pricing power—how much they can increase menu prices before driving away customers. Many operators already raised prices to keep up with inflation, and another round of increases due to tariffs could push cost-conscious diners to cut back on eating out.
“We cannot continue to raise consumer menu prices to balance our higher costs,” Korsmo warned. “To remain an engine that grows our national economy, we need relief.”
The NRA’s Call to Action: Exempt Food & Beverage Imports
While the NRA acknowledges that trade imbalances should be addressed, it argues that food and beverage imports do not significantly contribute to U.S. trade deficits. The association is urging the administration to exclude these products from the tariff plan.
Exempting food and beverage imports, Korsmo said, would:
- Minimize financial harm to restaurant owners.
- Keep menu prices stable for consumers.
- Support the restaurant industry’s role in driving economic growth.
With tariffs set to take effect within days, the restaurant industry faces a critical juncture. The NRA and restaurant operators across the country are watching closely, hoping for policy adjustments that could prevent further financial strain on the sector.
