Question Period Note: IMPACT OF U.S. TARIFFS ON GROCERIES/AFFORDABILITY

What has been the impact of U.S. tariffs on groceries and affordability?

• The Government of Canada knows that the economy is only truly strong when it serves everyone. Many Canadians are struggling to get ahead.
• U.S. tariffs are impacting consumers, workers and businesses in both Canada and the U.S.
• The government is providing tariff relief for goods imported from the U.S. that are used in Canadian manufacturing, processing, and food and beverage packaging until January 31, 2026, to allow time for Canadian manufacturers to adjust their supply chains.
• This relief will give Canadian businesses more time to adjust and prioritize Canadian sources of supply.

• Deeply integrated Canada-U.S. food supply chains benefit farmers, processors and consumers by providing essential goods at competitive prices, and ensuring high standards of food safety and quality.
• The current nature of the Canada-U.S. integration means that Canadian businesses need to go south of the border to develop new food ingredients from our crops – lentils, canola, peas, wheat and oats.
• The Government of Canada is supporting industry to grow and process more ingredients in Canada.

Food Prices

Year-over-year grocery price inflation has generally trended upward since its most recent low in April 2024 (+1.4%). Grocery items contributing to the general acceleration included fresh or frozen beef and coffee, both due, in part, to lower supply. Price increases for food purchased from stores peaked at 4% in September. Though grocery prices decelerated in October (3.4%), prices remained elevated and have exceeded overall inflation for nine consecutive months.
Tariff Relief

In April 2025, the Government of Canada announced a temporary 6-month relief for goods imported from the U.S. that are used in Canadian manufacturing, processing and food and beverage packaging. This remission is provided on a time-limited basis to provide businesses and entities with additional time to adjust their supply chains and prioritize domestic sources of supply if available, and applies to goods imported into Canada before October 16, 2025. On October 17, the Government of Canada announced that this exemption would be extended for an additional two months, and now includes goods used in agricultural production. On November 26, 2025 the Prime Minister announced that the temporary remission of Canadian tariffs for manufacturing, food and beverage packaging, and agricultural production will end on January 31, 2026.

Sector Overview

In 2024, Canada’s food and beverage processing sector generated $35.6 billion in GDP and over 310,000 jobs, representing 16.5% and 19.6% of manufacturing GDP and employment, respectively. In 2023, there were 8,696 food and beverage processing establishments with employees in Canada, with 92% classified as small (1 – 99 employees).

The distribution of facilities across Canada often reflects the availability of agricultural inputs, proximity to large consumer markets and regional economic conditions. The sector is also strategically important to other economic sectors (e.g., agriculture, forest product, tourism) given its use of inputs (e.g., vegetables, grains, paper packaging, plastic packaging) and role as a supplier (e.g., foodservice).

In 2024, Canada exported $58.4 billion of domestic processed food and beverage products, with 80% ($46.7 billion) going to the U.S., followed by China (5%) and Japan (4%). Reliance on the U.S. has only increased over the last decade with the market accounting for 80% of exports in 2024, up from 74% in 2015. Subsequently, the sub-sectors that are most reliant on the U.S. in terms of export intensity are bakeries and tortilla, grain and oilseed, sugar and confectionary, and preserved fruits and vegetables.

Canada-U.S. trade has resulted in a highly integrated food and beverage supply chain, including the exchange of cans, glass bottles, cartons, corrugate and other packaging materials between the two countries. This reliance also reflects the integrated nature of North American supply chains given that non-food inputs (e.g., steel cans) utilize inputs that are produced in Canada and exported to the U.S. for further transformation. According to industry, about 80% to 85% of food-grade steel cans are imported, largely from the U.S. Given U.S. tariffs on foreign steel, the price for these cans has increased, creating pressure for Canadian companies that manufacture canned vegetable and fruit.

Certain industries are also contending with tariffs from China. On August 14, 2025, China imposed a preliminary anti-dumping duty at a provisional rate of 75.8% on $4 billion worth of Canadian canola seed. China also announced it has launched an anti-dumping investigation into pea starch imported from Canada. This comes in addition to China’s 100% tariff on $1.3 billion worth of Canadian canola oil, canola meal and pea imports, and a 25% tariff on $1.7 billion worth of Canadian seafood, fish and pork, which took effect March 20, 2025.