How Will Tariffs Affect the Restaurant Industry?

Tariffs, tariffs, tariffs… if Q1 of 2025 could be summed up in a single word, it would probably be “tariffs.” Although the impeding changes may not directly affect everything that we consume, how will these increase in prices change our spending habits?

2020 was a very scary time for everyone, volatility in all aspects of our lives. What the stock market experienced back in April was eerily compared to the crash of 2020. Luckily, we won’t be experiencing the same shutdowns that we saw during COVID, but it is possible that the restaurant industry will see very similar repercussions.

Tariffs are expected to significantly alter consumer spending habits through price increases, budget strain, and behavioral shifts. Unfortunately, we will experience raising costs for goods like clothing, electronics and groceries. When things become more expensive, we see a consumer spending shift and people start reallocating budgets to essentials. The restaurant industry holds an interesting position in our lives in the sense that it is essential and non-essential at the same time.

One of the biggest impacts will be raising operational costs. 99% of our coffee, seafood and spices are imported. Some things can be supplemented by domestic alternatives, but as the demand increases for those products, so will the costs. Not only will the cost of the food increase, but so will the equipment prices, takeout containers and cutlery, paper goods, uniforms- almost all of the “behind the scenes” good. Strains on profitability is another large concern for operators. The average restaurant profit margin only lands around 5%-10% depending on the type of establishment. There will be some tough decisions made and trying to find the balance between raising prices despite consumer sensitivity and cutting their own costs. While not all restaurants will see equal impacts, tariffs will drive up costs across the industry.

Tariffs are poised to place significant strain on the restaurant industry, primarily through rising costs, operational challenges, and forced menu adjustments. To adapt, restaurants are exploring strategies such as joining purchasing cooperatives, renegotiating supplier contracts, and openly communicating price changes to customers. Industry groups like the National Restaurant Association are also advocating for exemptions on essential foodstuffs to ease the burden.

By: Kameron Ulrich

May 2025