Tariffs and the Food Industry: Understanding the Impact

When President Donald Trump announced a 90-day pause on most tariff spikes on April 9, consumers breathed a sigh of relief. The hikes were expected to send prices of imported goods soaring, but the stay offered a moment of quiet for Texans bracing for impact at the grocery store and in restaurants.

Across the food industry in Dallas-Fort Worth, business owners describe a sense of uncertainty and concern not felt since the pandemic. Some food businesses, both large and small, have been forced to deal with massive swings in the cost of Chinese imports, as tariffs see-sawed from 145% to 30%. The 10% tariff on items from the European Union has also caused stress for Texas restaurants and other food businesses, sending some into overdrive as they calculate and strategize solutions for what-if scenarios.

“In a business where every penny counts, this kind of volatility is tough,” said Emily Williams Knight, president and CEO of the Texas Restaurant Association.

What are Tariffs?

Simply put, tariffs are a tax levied on products the United States buys from other countries. These taxes are collected at the border. Most of the time, the importer passes the additional cost on to the distributor, who passes it on to the store owner or restaurateur, who passes some or all of it to the consumer.

The Impact on Restaurants

Restaurants, for instance, typically operate on thin profit margins between 3% and 5%, according to Umit Gurun, professor of Finance and Accounting at the University of Texas at Dallas.

“They must either absorb these higher costs by reducing their profits,” he said, “or pass them along to customers.”

Right now, many businesses are responding by deferring investment decisions and long-term contracts.

Some businesses are attempting to stockpile products. That is, if shelf life isn’t a concern and a business can assume the financial risk.

“This defensive inventory building,” Gurun said, “strains both warehouse capacity and cash reserves.”

Hidden Costs

Consumers might not be thinking about additional, sometimes invisible costs in the food industry. To-go containers, thermal and insulated packaging, and cooking equipment are brought in from outside the United States.

That’s reality for Adán Ventura, a caterer who sells ready-to-eat paella at Central Market in North Texas and at La Tienda locations nationwide.

Ventura’s cellphone is filled with messages he’s exchanged with suppliers about pricing, which has increased as much as three times compared to earlier in the year because of the tariffs.

Ventura owns two catering companies, Tasty Paella and ACD Kitchen as well as Easy Paella, a brand of ready-to-eat paella.

Adán Ventura, chef and owner of Tasty Paella, imports the custom boxes he uses for his ready-to-make paella kits from China and the rice he uses as the base for his paella from Spain.(Chitose Suzuki / Staff Photographer)

One of the first aftershocks Ventura felt were for thermal bags, which the chef orders from China for to-go orders of paella.

He picked up 4,000 bags for 89 cents each in February. With shipping, the product was expected to cost Ventura $1.60 per bag.

But the order was put on hold amid the roller coaster of tariff changes. Ventura watched as the shipping costs, the place where tariffs are typically tucked in, roiled.

The cost swelled to $3.60 per bag over the course of three weeks in March and April.

Sure, Ventura could buy bags in the U.S., but they would set him back $4.50 a piece.

“They ask for a $10,000 deposit to start working with me,” Ventura said, “and I don’t have that kind of money.”

Plus, he added, the quality is inferior.

Ventura’s order was finally shipped from China on May 12. He expects to receive the bags later this month.

It’s just one example of many in Ventura’s world.

A stainless steel cart he was eyeing for his catering events jumped from $120 to $350, before falling back to $250 with the Chinese tariff reprieve.

Adán Ventura showed a text message exchange with a supplier on his phone for a stainless steel cart he’s been eyeing.(The Dallas Morning News / Imelda Garcia)

Squid he brings in from China hopped from $4 per pound before the tariffs to $6.25 — and then skyrocketed to $18.

“I had to buy it at that price because we already had a Mother’s Day commitment,” Ventura said, “but we have to