Photo credit: www.cnbc.com
A shopper browses for produce at an H-E-B grocery store in Austin, Texas, on February 12, 2025.
According to reports, consumers are expected to see increased prices for items such as coffee, bananas, vanilla, and bathroom necessities like toilet paper due to the implementation of new tariffs by the Trump administration.
The U.S. government is set to elevate tariff rates on imported goods from over 180 nations and regions as part of a strategy aimed at encouraging the return of manufacturing jobs to the United States. However, the Consumer Brands Association (CBA), which represents major companies including Coca-Cola, Procter & Gamble, and Target, warns that some essential ingredients and materials crucial for everyday food and consumer products are not readily available within the country.
Tom Madrecki, who serves as the vice president of supply chain resiliency for the CBA, expressed concerns in a statement about the potential consequences of the tariffs. He noted, “While the objectives of the President’s America First Trade Policy may be well intended, it is crucial to recognize that many U.S. companies depend on imports for specific ingredients and materials that cannot be sourced domestically. Implementing reciprocal tariffs without considering ingredient availability will likely lead to increased costs, restricted access for consumers to affordable goods, and could inadvertently harm well-established American manufacturers.”
On a recent episode of CNBC’s “Squawk Box,” Commerce Secretary Howard Lutnick dismissed the notion that specific goods could receive exemptions from the new tariffs. Nevertheless, the CBA is lobbying for such exemptions on vital ingredients to help keep costs manageable for both its members and American consumers.
The geographical and climatic limitations of the U.S. restrict the growth of various staples in the American diet, including coffee, cocoa, and tropical fruits. For instance, the U.S. was the leading importer of bananas in 2023, with data from the Observatory of Economic Complexity revealing that almost 40% of those imports came from Guatemala, which will now incur a 10% tariff on exports to the U.S.
The impact of the tariffs will also extend to the prices of spices. Madagascar, which provides over three-quarters of U.S. vanilla imports, is facing a 47% tariff on its exports. Vanilla is already the second-most costly spice worldwide, and this increase could further escalate retail prices.
Amid the uncertainty, shares of McCormick, a key player in the spice market, experienced a slight dip of less than 1% during Thursday’s trading sessions. Executives from the company mentioned plans to mitigate tariff impacts through focused price adjustments and a comprehensive cost-saving initiative.
Shifts in the U.S. agricultural landscape over decades have also contributed to the difficulties in meeting domestic demand. Presently, more than 90% of the oats used for food products in the U.S. are imported from Canada, with the CBA highlighting that oat production in the U.S. has seen a decline for more than a century. Consequently, U.S. capacity for growing and processing oats has diminished to a level where it cannot satisfy current demand.
In addition to food items, consumers may notice higher prices for everyday household goods. Costs for toilet paper, diapers, lotions, and shampoos are likely to rise as manufacturers adjust their pricing to account for increased expenses related to raw materials such as wood pulp, bamboo fibers, shea butter, and palm oil. The U.S. primarily sources its palm oil from Indonesia, which is now subject to a 32% tariff.
Following the announcement of the tariffs, there was a notable decline in market performance on Thursday. However, stocks within the consumer staples sector, which encompasses many of the CBA’s member companies, saw an increase in trading. Investors appeared to shift their focus to more stable investments, further benefitting companies like Procter & Gamble, which saw shares rise over 1%, Coca-Cola’s stock climbed 2%, and General Mills recorded a 3% gain.
Don’t miss these insights from CNBC PRO
Source
www.cnbc.com