A brewing trade and tariff war is disrupting food ingredient markets worldwide. Recent disputes—from steep U.S. tariffs on key partners to swift retaliation by China—are raising costs and uncertainty for agricultural and processed food trade. Ingredient traders are navigating a minefield of tariffs that threaten supply lines and profit margins.

In early March, the U.S. imposed a 25% tariff on imports from Mexico and Canada, only to partially roll them back days later. Washington also increased blanket tariffs on Chinese goods to 20%, prompting Beijing to retaliate with 10–15% levies on U.S. farm exports like chicken, beef, pork, wheat, and soy. Major food manufacturers reliant on global inputs are feeling the strain. A trade group representing giants like PepsiCo and Mondelēz urged the White House to exempt certain imports (cocoa, coffee, spices, tropical fruits) that aren’t produced domestically. Analysts note that fresh produce prices could rise by approximately 3%, while overall food costs could see a 1% increase due to the latest tariff adjustments.

The Impact

Volatile tariffs are reshaping sourcing strategies in real time. Many U.S. food processors are turning to nearshoring and supplier diversification to reduce exposure. Alternatives like shifting ingredient orders to South America, Southeast Asia, or domestic suppliers are already underway. Thin margins in food manufacturing mean traders cannot absorb extra tariffs for long—eventually, higher ingredient costs get passed to buyers. Additionally, China’s new import duties are denting Chinese demand for U.S. soy, pork, and wheat, which has already pushed down U.S. grain prices. Meanwhile, other exporters like Brazil, Europe, and Australia are seizing the opportunity to sell more into China.

For food ingredient traders, the tariff war underscores the need for agility. Keeping a close watch on policy changes is now as important as tracking crop reports. Many are hedging bets by securing backup suppliers and adjusting contract terms to account for tariff risks. A proactive strategy—diversifying sourcing and building in flexibility — is the best defense in an uncertain trade climate.