Consumers will blame the food industry — not Canada’s trade policies

**Canada’s New Counter‑Tariffs Set to Impact Food Supply Chain, Not Immediately Grocery Prices**

CHARLEBOIS – Ottawa announced that a series of counter‑tariffs will take effect on September 8, targeting more than 700 categories of U.S. goods that total approximately $27.6 billion in imports. The measures are intended to match recent American tariffs on a dollar‑for‑dollar basis.

The tariffs will apply to a range of food‑related ingredients and packaging materials. Milk powders, concentrated milk, whey, casein and other milk proteins will face a 50 % tariff. Many cheeses will be subject to a 25 % tariff, while honey, molasses, certain baking mixes and frozen doughs will also be taxed at 50 %. Packaging items such as plastic food bags and film, corrugated boxes, paper bags, glass bottles and jars, and aluminum foil will be targeted, often at 50 %.

According to Sylvain Charlebois, director of the Agri‑Food Analytics Lab at Dalhousie University and co‑host of The Food Professor Podcast, the impact of these tariffs will be felt first within the food supply chain rather than on grocery shelves. “A Canadian‑made protein bar may not be tariffed as a finished product, but its whey protein, honey, plastic wrapper and shipping box could all become more expensive,” Charlebois explained. The same logic applies to baked goods, prepared meals, sauces, confectionery, protein drinks, dairy formulations and private‑label products.

The Canadian importer pays the tariff at the border, and the additional cost then enters the supply chain. Food processors must decide whether to absorb the cost, negotiate with suppliers, find alternative sources, reformulate products or ask retailers to accept a wholesale price increase. These options can be complex, involving new contracts, transportation arrangements, product testing and regulatory approvals. Domestic alternatives may not always be available in the required quantities or specifications, and sourcing from other regions can increase freight costs and delivery times.

Retailers are likely to resist price increases, especially while consumers remain highly price‑sensitive. Large processors may have the volume and bargaining power to negotiate, whereas smaller manufacturers may be more exposed. For many companies, the first sign of tariff‑related inflation will be a smaller margin rather than a higher shelf price.

Charlebois noted that the Bank of Canada’s research on last year’s counter‑tariffs found that prices of tariffed products rose gradually after the March 2025 measures, eventually reaching about six per cent above comparable untariffed goods. That represented roughly one‑quarter pass‑through of the 25 % tariff, with the rest absorbed elsewhere in the supply chain. Prices then declined after the tariffs were removed.

The current scenario suggests that the new measures could add up to 0.3 percentage points to grocery inflation at their peak, likely around April or May 2027, if the tariffs remain in place. This would be below the estimated 0.5‑percentage‑point peak effect associated with last year’s broader counter‑tariffs. However, Charlebois cautioned that this is a scenario, not a forecast, and that substitution, tariff remissions, weak consumer demand and margin absorption could reduce the impact. A negotiated settlement could also remove the tariffs before the full effect reaches consumers.

“Tariffs on ingredients and packaging are not surgically contained. They spread across multiple products and businesses, often invisibly,” Charlebois said. “The real concern is accumulation. A manufacturer may face higher costs for a dairy protein, a sweetener, plastic film and a cardboard box at the same time. Each increase may seem manageable on its own. Together, they can undermine the profitability of an entire product line.”

The tariffs are expected to affect Canadian importers, processors and manufacturers from both sides of the border. While consumers may not see immediate price increases at checkout, the economic pressure will eventually be reflected in grocery inflation and potentially in reduced product choices, promotions and investment.

Article and image source: torontosun.com