Tariffs leave a bitter aftertaste — especially when they’re added to fresh fruits and vegetables.
President Donald Trump’s tariffs on Mexico and Canada went into effect this week. They were delayed a month to give both countries a chance to negotiate. On Monday, however, Trump said there was “no room left” for such bargaining. U.S. stock markets tumbled on the news.
In addition to imposing the 25% tariffs on imports from Canada and Mexico this week, the president raised tariffs on imports from China by 10%, on top of the 10% tariff on Chinese imports he announced last month.
Economists have said the trade war ushers in a new wave of uncertainty, but it will also take their toll on U.S. consumers — and their weekly grocery bill. Fresh fruit and vegetables, more than any other food group, will be among the hardest hit.
The most perishable and unavoidable goods are fresh fruit and vegetables, and they will bear the brunt of the grocery-basket increase. “Mexico is half of U.S. fresh fruit and vegetable imports,” said Ernie Tedeschi, director of economics at the Budget Lab at Yale University.
You can always buy a secondhand jalopy, but it’s much harder to skimp on fresh food.
“The equation really changes when you put those tariffs on Mexico,” he added. “The lowest 20% of U.S. families spend $490 a year on fresh fruits and vegetables.” Here’s a taste: roughly 90% of U.S. avocados come from Mexico, and nearly all imported tomatoes and lettuce come from Mexico.
“It’s a lot of money. Food is not a discretionary item,” Tedeschi said. “This is not junk food we’re talking about. When you put taxes on this type of food, families often literally and figuratively end up eating the tax.” The end result: less bang for your buck with the weekly grocery shopping.
You can always buy a secondhand jalopy from a neighbor or car dealership for a few hundred bucks if you are strapped for cash. But aside from eating at home, freezing your avocados and going easy on fillet steak, it’s hard to skimp on food.
On Tuesday, Target TGT CEO Brian Cornell told CNBC that the big-box retailer relies on fresh fruit and vegetables imported from Mexico during the winter months, and said customers should expect the price of items on everything from strawberries to bananas to go up.
Imports of fresh food
The only alternative is to buy processed fruit and vegetables and frozen, which may end up being cheaper even if they are, in some cases at least, less nutritious than fresh food. “But quite a bit of the frozen fruit and vegetables also come from Mexico,” Tedeschi said.
How will consumers feel about all of this? Thus far, they don’t appear to be happy. Tricks of the Trade, a new report by Numerator, a data and research company, surveyed 1,000 U.S. consumers last month to shed light on how tariffs are impacting sentiment and shopping habits.
The takeaway, to be blunt, could be summed up as the attack of the killer tomato tariffs. Shoppers are most worried about tariff-related price increases in categories such as groceries (55%), gasoline (41%), household goods (34%) and medical supplies (29%).
These are notable because they are unavoidable. Cars have parts that cross borders multiple times and will be one of the items hardest hit by the Trump administration’s tariffs. Cox Automotive estimated that cars assembled in Canada or Mexico could see an average tariff hit of more than $5,000.
Related: Trump’s trade war is a call to action
Tariffs on groceries will make both imported and domestically produced food more expensive in the long run, said Mehmet Ihsan Canayaz, an assistant professor of finance at the Smeal College of Business at Pennsylvania State University.
He gave a literal apples-to-apples example: An imported apple that costs $1 will cost $1.25, he said. “It will be difficult for the foreign apple producer to compete with apple producers here at a lower price. But over time there will be less domestic competition, so apple producers in the U.S. will have less incentive to reduce prices.”
“That will hurt consumers,” he added. “In both cases, the U.S. consumer will pay more for apples. Once you start the war, it’s almost inevitable that the other country will retaliate; otherwise, they risk looking weak. So it spirals out of control.”
The same thing will happen to oranges grown in the U.S. and exported. Those countries will impose tariffs on American goods. “Every consumer that has a 401(k) driven by how the orange company will perform will be hurt as well,” he said.
Fresh produce such as apples, oranges, bananas, avocados and tomatoes are vulnerable in a trade war. Take the latter: Since 2000, the number of fresh tomatoes imported into the U.S. rose by 176%, according to the Department of Agriculture’s Economic Research Service.
Since 2000, the number of fresh tomatoes imported into the U.S. has grown by 176%.
“Over the last two decades, nearly all import growth has stemmed from tomatoes that were grown in greenhouses,” agricultural economists at the ERS wrote last year. “In the early 2000s, greenhouse fresh tomatoes represented about 14% of fresh tomato import volume and 23% of value.”
“The increase was driven primarily by expansion of year-round greenhouse tomato production in Mexico, the foremost supplier of tomatoes to the United States,” they added. Imports accounted for approximately 88% of the domestic greenhouse tomato supply in 2023.
Freezing is not a long-term solution. Even in an apocalypse, frozen tomatoes would only last six months, and they’re mostly fit for use in soups, sauces and stews because, as this guide points out, they become mushy when thawed. The outlook is worse for frozen avocados, which only last a month.
There were other eye-opening details from the Numerator report: 83% of U.S. shoppers say they’re aware of new or proposed tariffs, up significantly from 53% in December. That’s a good thing, but it’s shocking that so few people knew about the tariffs before Trump’s inauguration.
Read more: As egg prices spike, some see an investment opportunity that’s tough to beat
Still, Americans are bracing themselves for these tariffs. Some 76% said they expect to make changes to their shopping habits in response, including by keeping an eye out for sales or coupons (41%), stocking up ahead (23%) or delaying purchases until prices stabilize (22%).
The administration has said that the tariffs are a response to what Trump regards as lax border control on behalf of Mexico and, as the new administration sees it, a way of correcting trade imbalances with both Mexico and Canada (and with China).
That theoretical apple and tomato represent trillions of dollars in trade. Last year, U.S. trade with China, Mexico and Canada totaled $2.2 trillion, according to the Commerce Department. Mexico accounted for $840 billion and Canada accounted for $762 billion.
“This is mostly driven by political ideology,” Canayaz said. “It doesn’t make any financial sense. It’s a clear constraint. There’s no way it will improve any economic outcome.” Canada will suffer, Mexico will suffer and, as the price of goods goes up, he said, so will the U.S. consumer.
Over $1,100 per household
But this trade war may also sow discontent among American consumers: 35% of U.S. shoppers support the tariffs, Numerator added; 23% feel neutral or have no opinion, and 38% oppose them. Those who “strongly oppose” outnumber those who “strongly support” by 2 to 1.
They may have good reasons. Yale’s Budget Lab estimated that the “distributional effects” of 20% tariffs on China and 25% tariffs on Canada and Mexico would hit the average household by $1,600 to $2,000.
These estimates are before consumers make the difficult choices about how to change their spending habits. Post-substitution, the effect on prices “settles somewhat” to an average consumer loss per household of $1,100 to $1,400, it adds.
It also described the current trade war, as we understand it, as a “regressive tax,” meaning it disproportionately hurts lower-income people. These are the people who can’t avoid it and can’t simply instruct their accountant to find a loophole to avoid such tariffs.
When the prices of eggs, tomatoes and avocados hurt your wallet, you cut down on spending in other areas.
“Losses for households at the bottom of the income distribution would range between $900 and $1,100,” the Budget Lab concluded. And while electronics, motor vehicles and clothing will be disproportionately affected, food will “see above-average price increases as well.”
When people notice the prices of eggs, tomatoes and avocados are hurting their wallets, economists say, they cut down on spending in other areas of their lives — so companies cut costs, investors get nervous, hiring slows down and those nerves hit the stock market.
For instance, based on Congressional Budget Office guidelines, the Budget Lab estimates that the effects of the range of tariffs on goods from Mexico, Canada and China would result in a reduction in tax revenue by between $300 billion to $360 billion.
There’s a fine line between retaliation and revenge, and neither tends to end well. It’s a battle of wills to see who, if anyone, blinks first. But what nervous investors and jittery consumers want to know is who will end up paying the price.
Also see: The ‘economic blackout’ is a fool’s errand
