By Jennifer Hill Booker
The threat of tariffs on imported goods has sent a ripple of uncertainty through the U.S. economy. With an on-again/ off-again trade war, it’s difficult to know what items will be subject to a tariff next week, much less next month. Restaurants are feeling this instability as keenly as any other business, and industry leaders are starting to talk about solutions. The National Restaurant Association even released a statement on April 2, detailing the disruption tariffs would cause the restaurant industry and committing to request of the White House that food and beverages be exempted from the tariffs.
Let’s start by defining a tariff. The short definition is that they are a tax on imports, paid by businesses importing foreign goods into the country. This tax is then added to the cost of those goods and passed on to the consumer buying them. Tariffs aren’t new to the United States economy, but under the new presidential administration, they are higher than they’ve been in almost 100 years.
The new tariffs currently in play will touch every part of the American economy, with restaurants and the hospitality industry being hit particularly hard. Restaurants run on very small profit margins. Their budgets are made up of both fixed costs (like rent, loan payments and insurance premiums) and variable costs (like food, hourly wages, utilities and equipment repairs). Any unexpected or unplanned costs added to a restaurant’s budget, which these higher tariffs would surely be, could cause that budget to come crashing down. Why?
The hospitality industry is deeply connected to global trade for everything from ingredients to equipment. When existing tariff rates are increased or new tariffs are placed on countries that supply restaurant staples (like coffee, spices, aluminum cans and to-go containers), that cost is passed on to the consumer.
Chefs and restaurant owners use food to express their culture, and they need affordable access to ingredients to do so. Current uncertainty has caused some restaurant owners to revisit their original business plans, especially if their food and beverage menus were created in a time of free trade and low tariffs, and especially if their entire concept is built on ingredients not grown or made in the U.S., such as Asian, Caribbean or African cuisines.
Recent U.S. tariffs imposed on goods received from other countries range from 10% for items like bananas from Columbia, to 32% for cocoa from Indonesia, to a whopping 46% for seafood from Vietnam. Tariff amounts seem to be changing almost daily, with the threats of some tariffs, such as those on China, being as high as 145%.
All of this has led to confusion and uncertainty for restaurateurs as they source products. Tariffs have also caused some to delay repairing restaurant equipment, due to the expense or unavailability of parts, and required operators to plan menu changes more frequently due to the scarcity of supplies. Increased tariffs have also increased the challenges many restaurants face in trying to meet both fixed and variable costs by reducing their overall revenue.
Stock up, educate, go local
How can restaurants not just survive, but thrive under these new tariffs? Restaurant owners and chefs are being greeted with everything from words of encouragement to suggestions to change their menus to advice to cut their losses and close.
Tariffs were a hot button topic at the James Beard Foundation Chef Action Summit, in Asheville, NC, in early April. Those in attendance represented the hospitality industry with professions that ranged from chefs, culinary educators, farmers, baristas, mixologists, brewers and restaurant owners. Discussions ranged from fear and anger to uncertainty and resignation, with attendees asking how the hospitality industry can prepare for what could potentially be an on-going and ever-increasing tax on imports.
Adrian Lipscombe, chef and founder of the Texas-based 40 Acres & a Mule Project, suggested restaurants create or join groups to negotiate lower prices for bulk orders. Some restaurant owners in attendance agreed, saying that they are already stockpiling imported ingredients and supplies, but acknowledging that not everyone has the resources or space to do that.
Another suggestion emerging from the James Beard Summit was for operators to try to manage guest expectations by educating them on the effects of tariffs on menu item availability and costs. Some presenters suggested revamping beverage programs to rely less on imported wine and spirits and more heavily on those made in the United States.
Food activists attending the summit encouraged chefs and owners to become food advocates by reaching out and applying pressure on their elected officials to write and pass bills that increase fair trade and reduce tariffs. Attendees were also encouraged to ask their customers to do the same.
Other suggestions included creating smaller menus based on locally and seasonally sourced ingredients and limiting the amount of imported ingredients used in recipes. Some in attendance voiced concern that not all establishments have easy, affordable access to locally sourced ingredients. The discussion also raised the questions, ‘Are there enough local ingredients to go around?’ and ‘How do we get them?’ When the discussion shifted to the suppliers of local ingredients, the point was raised that tariff increases affect not only the price of imported goods, but potentially our entire food system.
One BIG question remained unanswered: While all these changes are happening, will customers continue to dine in restaurants that no longer have their favorite imported wines, bowl of noodles or chocolate desserts? The hope is that they will come out, show support and even advocate for restaurants. But that remains to be seen.
Jennifer Hill Booker is a chef, author, food advocate and restaurateur. She is also Immediate Past President of Les Dames d’Escoffier Atlanta Chapter.
