CEO’s Perspective: A Primer on Tariffs

As a CEO, one topic that can’t be avoided today is tariffs. Given the far and wide ranging nature of tariffs, it’s nearly impossible to truly understand all of the implications for your company, let alone your suppliers or customers. Nevertheless, as a chief executive, it’s your job.

Here’s my take, and hopefully this primer on our current status, along with a brief timeline of events, is helpful to understand the basics. 

The United States, Canada, and Mexico

Generally, the three North American countries are each other’s biggest fresh produce trading partners.  Specialty produce is covered under the United States-Mexico-Canada Agreement (USMCA) and therefore exempt from reciprocal tariffs and duties. So for those seeking clarity—that’s a win!

However, this does not mean that costs won’t increase. Tariffs cast a wide net and will indirectly impact the cost of goods sold.

Case in point, on May 3 a 25 percent charge was added to imported new vehicles and car parts—so that new Sprinter van (if it wasn’t manufactured at the Mercedes South Carolina plant) will cost more, and the farm tractor that needs repairs will likely cost more. 

China

Especially for companies on the West Coast, trade with China is a meaningful source of revenue. Things escalated far more quickly: in early April, tariffs on Chinese imports increased from 34 to 84 to 125 percent. China predictably imposed its own retaliatory tariffs also set to 125 percent—specialty produce items are directly affected by this. 

European Union

In April, the European Union has also offered a version of its own tariffs affecting produce items (albeit at a much lower rate). Categories like citrus, berries, nuts, tomatoes, and others are affected. Notably, these tariffs were recently paused to provide time for negotiations.

Rest of the World (apologies for being overly broad)

Early in April, the United States announced a 10 percent tariff baseline on nearly all imports with more than 50 countries also being subjected to reciprocal tariffs. While the reciprocal tariffs were subsequently paused to allow for negotiations, with some exceptions, the baseline tariffs are still in effect.

Industry Response

The following shows how industry players are signaling their response to tariffs.

Retailers- Responses have varied across food retailers, but here’s a sampling:

• As recently as April 29, Albertsons informed suppliers that “with few exceptions, we are not accepting cost increases due to tariffs.”
• Southeastern Grocers, the parent company of Winn-Dixie, has taken slightly softer stance, “In anticipation of potential tariffs, we have been working diligently with our supplier partners to minimize cost increases and supply chain challenges, and we will continue to do all we can.”
• The nation’s largest food seller, Walmart, has promised to maintain its everyday low price strategy, and according to reports, has quietly been pushing back on suppliers to absorb cost increases. 

Trade Associations- Associations have been more vocal about expressing their opinion on tariffs:

• The Banana Association of North America is on the record warning that the price of bananas could increase as much as $250 million based on reciprocal tariffs to Central and South American countries.
• The National Grocers Association has sounded the alarm, warning “Independent grocers once again face the risk of being pushed to the back of the supply line if tariffs trigger product shortages.”
• The National Restaurant Association has also expressed its concern that price increases will compound already tight margins stretched from inflationary pressures over the last five years.

The Rundown

The ongoing tariffs and negotiations are extremely dynamic, and I urge readers to stay abreast of all the updates through news (www.bluebookservices.com/news). Here’s a quick recap on tariff activity:

• January 20: Trump sworn in, promises tariffs on foreign countries; plans 25 percent tariffs on Canada and Mexico starting February 1.
• January 26: Trump threatens 25 percent tariffs on Colombian imports after dispute with President Petro over migrant deportations; Colombia later reverses position.
• February 1: Trump signs executive order imposing tariffs—10 percent on China, 25 percent on Mexico and Canada (February 4), citing national emergency.
• February 3: Trump pauses tariffs against Mexico and Canada for 30 days as both work on border security.
• February 4: the 10 percent tariffs on Chinese goods go into effect; China retaliates with tariffs and an investigation into Google.
• February 10: Trump announces steel and aluminum tariffs to increase starting March 12, raising aluminum from 10 percent to 25 percent.
• February 13: Trump proposes “reciprocal” tariffs, matching other countries’ import tax rates.
• February 25: Trump orders the U.S. Commerce Department to consider tariffs on copper for national security.
• March 1: Trump asks the Commerce Department to consider tariffs on lumber and timber for national security.
• March 4: Tariffs on imports from Mexico and Canada (25 percent) and China (20 percent) begin; retaliatory measures from all three countries follow.
• March 5-6: Trump delays tariffs on automakers (March 5) and extends tariff suspension on many USMCA-compliant goods from Mexico and Canada (March 6).
• March 10: China imposes 15 percent tariffs on U.S. farm exports (chicken, pork, soybeans, etc.).
• March 12: New 25 percent tariffs on steel and aluminum imports start; the European Union and Canada announce retaliatory tariffs.
• March 13: Trump threatens 200 percent tariff on European wine if European Union imposes a whiskey tariff.
• March 24: Trump threatens 25 percent tariffs on countries importing oil from Venezuela.
• March 26: Trump announces 25 percent tariffs on auto imports effective April 3.
• April 2: Trump announces reciprocal tariffs, with a baseline 10 percent tariff, and higher rates for trade surplus countries, including 34 percent on China.
• April 3-4: U.S. auto tariffs begin; Canada implements a 25 percent tariff on U.S. auto imports; China announces a 34 percent tariff on U.S. goods.
• April 5: the 10 percent minimum tariff on global imports takes effect.
• April 9: Trump suspends most higher tariffs for 90 days but maintains 10 percent global import tariff; China retaliates with 125 percent levies on U.S. goods.
• April 10: the European Union delays retaliatory tariffs for 90 days; clarification on Trump’s 125 percent tariff on China—actually 145 percent after adding fentanyl tariffs.