The restaurant and food industries breathed a collective sigh of relief last week when Canada announced it would lift retaliatory tariffs on American food products. After months of struggling with inflated costs, the move signals welcome financial breathing room for businesses already operating on razor-thin margins.
“We’ve been paying an extra $1,200 monthly just on cheese since these tariffs hit,” says Maya Wilson, who owns three casual dining spots in downtown Toronto. “That might not sound like much to a large corporation, but for independent restaurants like mine, it’s the difference between hiring another part-timer or not.”
The counter-tariffs, which targeted American dairy, prepared meals, and various food ingredients, were implemented in response to U.S. steel and aluminum tariffs imposed in 2018. When these added costs flowed through the supply chain, they disproportionately squeezed food service operations already grappling with post-pandemic recovery challenges.
According to Restaurants Canada, the industry group representing food service businesses, their members reported average cost increases of 17% on affected ingredients—forcing difficult choices between raising menu prices or absorbing costs that further compressed already thin profit margins.
“The timing couldn’t be better,” explains James Rilett, Vice President of Restaurants Canada. “With inflation finally showing signs of cooling and consumer spending still cautious, this tariff relief gives operators a chance to stabilize without immediately passing costs to diners.”
The effects extend beyond restaurants to food processors and manufacturers. Statistics Canada data shows food manufacturing profit margins contracted by 3.2 percentage points during the tariff period, with smaller regional producers bearing the heaviest burden.
Maple Valley Foods, an Ontario-based prepared meals manufacturer employing 46 people, had been contemplating layoffs before the announcement. “We source certain specialty ingredients from U.S. suppliers that simply don’t have Canadian equivalents,” explains operations director Samuel Zhang. “The tariff removal means we can maintain our current workforce and potentially expand production again.”
Economists at RBC note that while headline inflation has moderated, food inflation remains stubbornly high at 5.8% year-over-year as of the latest Consumer Price Index. The tariff removal could potentially shave up to 0.4 percentage points from food inflation figures in coming months—a modest but meaningful improvement.
For consumers, the effects won’t be immediately obvious but should gradually materialize. “Don’t expect dramatic menu price drops overnight,” cautions Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University. “Restaurants and food retailers will likely first recover some of their lost margins before passing savings to customers. But competitive pressures should eventually bring some relief, particularly in dairy-heavy menu categories.”
The dairy sector, which faced some of the steepest tariffs, stands to benefit significantly. Canada imported approximately $478 million worth of American cheese and dairy products last year despite the additional costs. Industry analysts at BMO Capital Markets project dairy imports could increase by 8-12% with tariffs removed, potentially moderating prices for everything from pizza to ice cream.
For entrepreneurs like Wilson, the savings translate into tangible business decisions. “We’ve put equipment upgrades on hold for almost two years. Now we can finally replace that walk-in cooler that’s on its last legs without going deeper into debt.”
The policy shift also carries broader economic implications. Food service represents Canada’s fourth-largest employer with over 1.2 million workers. Stabilizing this sector could help maintain employment levels as the economy navigates uncertain terrain.
“What most people don’t realize is how tightly food businesses connect to local economies,” explains Rilett. “When restaurants save on ingredients, they’re more likely to hire local staff, purchase from local suppliers, and maintain the vibrant commercial districts that define our communities.”
Challenges remain, however. Labor costs continue climbing, commercial rents in major urban centers show no signs of retreating, and interest rates remain elevated. Several industry veterans caution that while the tariff relief helps, it represents just one piece of the complex puzzle facing food businesses.
“We’re still paying 30% more for most ingredients than pre-pandemic,” notes Wilson. “The tariff situation was like having a foot on our neck while we were already underwater. Now maybe we can at least get our head above the surface.”
The policy shift also demonstrates how deeply integrated North American food supply chains have become. Despite Canada’s agricultural strength, the reality of modern food production means ingredients often cross borders multiple times before reaching diners’ plates.
Government officials have emphasized the practical benefits of removing these “self-imposed costs” on Canadian businesses and consumers. Finance Ministry estimates suggest the move could save the Canadian economy approximately $550 million annually—a modest but welcome contribution to economic growth.
For diners wondering when they might notice changes, patience remains essential. “You’ll likely see the impact first in promotional offers rather than base menu prices,” suggests Charlebois. “Think expanded happy hours, loyalty rewards, or special menu additions before outright price reductions.”
As restaurant owners like Wilson recalibrate their operations in response to the news, the prevailing sentiment mixes cautious optimism with pragmatism. “Every little bit helps right now,” she says, “but nobody in this business is planning champagne celebrations just yet. We’re just grateful for one less financial headache in an industry that never lacks for challenges.”
