A critical concern among economists is that President-elect Donald Trump’s proposed blanket tariffs on imports would drive up food prices.
Trump campaigned on the promise to lower costs for households as expenses have surged across the economy. Groceries were no exception, with prices rising due to a combination of economic factors, including geopolitical tensions, weather events, supply chain disruptions and inflation.
While the pace of inflation has eased, rising 2.6% in October, grocery costs are between 20% to 25% higher than they were four years ago.
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The proposed 10%-20% tariff on imports from all foreign countries along with an additional proposed 60%-100% tariff on imports specifically from China could exacerbate the situation as shoppers would bear the brunt of the increased costs, David Ortega, food economist and professor at Michigan State University told FOX Business.
“Tariffs drive up the cost of goods domestically by increasing production costs and reducing competition. Ultimately, the higher costs get passed along to consumers, with low-income households again bearing the brunt of the burden,” Ortega said.
Trump-Vance transition spokeswoman Karoline Leavitt told FOX Business that during Trump’s first term, the tariffs imposed on China “created jobs, spurred investment and resulted in no inflation.”
She said Trump plans to restore the economy by in part “re-shoring American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations and unshackling American energy.”
But when lower-income households spend a larger share of their income on food, they will be forced to make difficult trade-offs such as cutting back on other essentials like housing, health care or transportation to ensure they can still put food on the table, Ortega said.
TRUMP’S TARIFFS WOULD DRIVE UP CONSUMER PRICES: NATIONAL RETAIL FEDERATION
Duke University economics professor Felix Tintelnot said that since the proposed import tariff would be imposed on all countries, “one cannot relocate production to bystander countries” to avoid pushing the higher costs onto consumers.
In 2018, when import tariffs were imposed on all countries exporting washing machines or steel to the United States, it yielded large price increases for consumers, according to Tintelnot.
If tariffs are imposed, items that domestic producers import would rise, including other input costs like fertilizer, farmers’ equipment and ingredients that food producers use to make food.
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Tintelnot said that if foreign food prices go up because of tariffs, domestic producers might also raise their prices to take advantage of the increased demand for their products.
But Ortega warned that the levies could lead to other consequences, including retaliatory tariffs from other countries.
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“As for retaliation, recent history shows us that other countries won’t sit back quietly,” he said.
Ortega referenced the U.S.-China trade war six years ago when China responded with retaliatory tariffs that impacted American farmers.
Retaliatory tariffs caused a reduction of more than $27 billion (or annualized losses of $13.2 billion) in U.S. agricultural exports from mid-2018 to the end of 2019, according to 2022 data from the Agriculture Department. China accounted for about 95% of the losses, the department said.
