The Agenda with Steve Paikin (Audio) - Are Tariffs Driving Up Food Prices in Ontario?

Episode Date: May 30, 2025

President Donald Trump's trade threats and tariffs have brought uncertainty to markets worldwide. Canada has responded with its own counter tariffs. Should Ontarians expect to pay more at the grocery store? And is there a risk that companies could exploit the chaos and bump up sticker prices regardless? We discuss with Stuart Trew, director of the Trade and Investment Research Project at the Canadian Centre for Policy Alternatives; Mike von Massow, food economist and professor at the University of Guelph; Karl Littler, senior vice-president of public affairs at the Retail Council of Canada; and Tu Nguyen, economist and director of environmental, social, and governance for RSM Canada.See omnystudio.com/listener for privacy information.

President Donald Trump's trade threats and tariffs have brought uncertainty to markets worldwide. Should Ontarians expect to pay more at the grocery store? And is there a risk that companies could exploit the turmoil and bump up sticker prices regardless? Let's ask. In the nation's capital, Stuart True, Director of the Trade and Investment Research Project at the Canadian Centre for Policy Alternatives in Guelph, Ontario. Mike von Massow, food economist and professor at the Ontario Agricultural College at the University of Guelph. In the provincial capital, Carl Littler, senior vice president of public affairs at the Retail

Council of Canada and with us in studio, Tu Nguyen, economist and director of environmental, social and governance for RSM Canada. Welcome to In Our Studio and for those joining us online. Before we dig in, let's look at part of the message. This was by Par Bank, President and CEO of LawBlock Companies Limited. He recently posted on LinkedIn, our customers might have seen a T symbol

on our shelf labels, which indicated that a product has been impacted by tariffs. So far, we've been able to limit the number of T symbols on our shelves to a little over a thousand items. But our inventory is running out and in the next week or two, the number of products with a T symbol will surge to over 3,000. Within the next two months, that number could peak at over 6,000. All right, so we get a sense of how companies are trying to sort of be transparent

and balance things during these erratic times. Mike, I'm curious, you know, there's been a lot of news. Yesterday we know a US federal court blocked many of Trump's tariffs, ruling that there was administration overstepping. The Trump administration, of course, has appealed that. Catch us up to speed here. If this ruling stands after the appeal, what does this mean for our counter tariffs and the tariff situation right now?

Well, most of the tariffs have been paused anyway, and this ruling doesn't relate to the automobile or steel and aluminum tariffs. So fundamentally, I don't think it changes a whole bunch in our relationship with the US as it sits right now. Stuart? Yeah, I would tend to agree with that. I mean, there are these tariffs still in place, auto, steel, these are highly problematic. They're resulting, as we've seen, in work stoppages and layoffs in Ontario. So that's a big, a big problem. I think though, I think though the effect of the court ruling will be substantial, and it does make Trump look pretty bad, right? In applying those broad tariffs, the migration and fentanyl-related tariffs on Canada, it really kind of undermines fundamentally what Trump has done there. Might give Canada some leverage as we continue to try and get rid of those other tariffs

that are actually in effect. Carl, I'll get your take as well. Yeah, I might see it a little bit differently. The tariffs that were ruled illicit were in relation to the spurious fentanyl basis. And so Canada's first tranche of tariffs on $30 billion of US goods actually is pretty heavily focused on food. So to the extent that these are struck down, and if that is maintained through the court system,

and if Canada then responds with respect to its retaliatory tariffs, then food actually could be significantly exempted as a consequence. Is it fair to say then that we could see those T signs come down? Well, I think it's a bit precipitous for that. I mean, the government, the US government has, as I understand it, 10 days to bring themselves into compliance

and obviously the Canadian government still facing the steel and aluminum tariffs and obviously a pretty fractious trade environment is going to need to consider what would remain in place and what would not. But certainly on the surface of it, it is possible that if the retaliatory measures in response to that sort of fentanyl push from the US side were to be dropped by the Canadian government, that could have a significant impact on the food side. Alright, let's take a step back to, from yesterday's news, have a bigger scope over the last couple of months. What kinds of things are going up in price at the grocery store? Well, so Canada has put retaliatory tariffs on a lot of food items coming from the US, that's 25% on everything from dairy to meat and seafood and whatnot. So those are items where we have seen being impacted by tariffs.

Now the Canadian government has actually dropped a lot of the tariffs, specifically on food that is manufactured or packaged in Canada. So I think the biggest impact we will see is from perishables that are brought directly from the US and not being repackaged and further processed here. Mike, I am curious, you know, it seems kind of hard to think about what it was like before January. But before all the tariff related back and forth, what was the situation with grocery prices here in Canada? Well, we've seen the grocery prices go up over the last three or four years for a variety of reasons. We know, you know, we talk about extreme weather

and the war in Ukraine and a lower Canadian dollar. And, you know, it adds up, we sort of had a perfect storm of impacts, if you will, that led to these price increases. So we'd seen some of those begin to moderate a little bit. We hadn't seen prices come down a lot, but the rate of increase had slowed dramatically. And before January, we were saying that food was actually lagging behind the general rate of inflation.

All right, too. I'm curious, you know, as Mike had mentioned, there's a number of factors that kind of go into the prices that we see. Can we identify which factors are driving prices up, in particular if we're talking about, you know, climate disasters, if we're talking about war? Are we able to kind of get behind those numbers? Well Well it really varies on a case-by-case basis. For example, if it's climate disasters we know that it's going to be crops that are specifically impacted by those disasters, right? Wildfires, drought, extreme temperatures. If it's the war in Ukraine, it's

going to be wheat, a lot of grains, cooking oils. So it really depends. With tariffs, we do have a list of what is being impacted posted on the government website. So there is much easier to identify. Is it possible to determine though how much tariffs play a role when we talk about, if we're talking about cents and dollars for sort of down the line to a consumer, how much that, you know, a terrible impact versus something like a climate disaster? Well, that is a lot murkier to determine because, as you might know, the price of something

is determined by not only the cost of production but also the prices you have to pay to the workers, transportation costs, so gasoline price fluctuations also the prices you have to pay to the workers, transportation costs, so gasoline price fluctuations also impact prices, and then the cost of storage, warehousing, to a number of other factors. So while we can see that, okay, there are certain drivers driving up prices of certain goods, how much of that ends up being in the price increase is much harder to determine. Alright, Stuart, is there any way for a customer to confirm which specific goods are being affected by tariffs beyond the signs placed by law laws, for example?

I imagine they could go through the list themselves, but is there some other way that they can kind of identify and figure out? Yeah, there is the list. There is a tariff tracker that was established by a number of government agencies as well. So if you have the wherewithal, you can go to that. I think it's tarifftracker.ca if I'm not mistaken. And while you're perusing the store shelves, you can even punch in what you think you're looking at, right? Almond milk or something like that, and go through a number of prompts on the site and it'll eventually tell you

if it does face any tariffs on the products. You have to specify the country of origin and that kind of thing. But that's a hassle, I think, for people to go through at the grocery store shelves. I think I'll just kind of emphasize, too, what we've been saying, that it's very difficult to determine all the factors that lead to what you're paying at the grocery store. And that's not just because there's a lot of factors like currency value and the cost of production and whatnot, climate change in the case of food. But it's because a lot of the places where we buy our foods, grocery stores, sell a lot of stuff that isn't groceries.

And they have the power to establish margins on different products. So they can raise prices here, lower them there, they do this on different bases to get people into the store buying stuff, and we simply have no idea on what basis they are charging, what prices for what goods. So I think that is an issue, something we can take up as a government, potentially not in an extremely public way, making them show the books to everyone, but it's possible we could have some reforms at the competition bureau, for example, where somebody is seeing how they're making those choices, essentially, to make sure that they're not pulling any strings on us. All right.

I want to pick up on that a little bit later. Mike, let's talk independent grocers versus chains. Are they facing similar pressures due to tax? Well, I think independent grocers in many cases will have similar pressures to the big grocers. They're buying things perhaps from different distribution systems, but they're buying things that may be tariffed. I think it's also important to remember that the US tariff on aluminum and steel, although we're not tariffing food packaging coming back, may actually increase the cost of some things that aren't tariffed

because packaging will go up. So I think that independent grocers, in some cases, if they're bringing in specialty items that are on the list, may feel a pinch. If they're not bringing those items in and are more focused on Canadian products, there shouldn't be an impact. So it depends by an individual store, what's on the shelves and where they're getting those products from. I think it's important to remember

that there was a relatively selective imposition of tariffs. As Tu said, dairy products have tariffs on them, but the U.S. share of the Canadian dairy market is relatively small, so there will be non-tariffed products remaining on the shelves that will protect people. So the store impacts will vary depending on what they have on the shelves. Alright, from that to then I'm going to come to you. How easy will it be for customers to substitute the tariff goods for Canadian goods? Well, that depends and I think in this case the Canadian government actually was quite

strategic in placing tariffs on items that can be substituted. For example dairy can be substituted, meat a lot of time can be, produce, so fresh fruits and vegetables are easier to substitute in the summer. There are certain things that we just don't grow in Canada, right? So oranges, for example, is a prime example of goods where if consumers want to buy them, they just have to pay higher prices. But what has been happening is that some grocers and some shoppers are switching away from American-grown products to imports from other countries. So that is a way of substitutability as well.

I'm not just going towards Canadian grown. Obviously we do see the My Canadian movement leading people to prioritize Canadian products, but also to substitute and diversify away from American products. All right, Mike, I'm coming to you this because I know you love Wisconsin cheese. So I am curious, are there items that are harder

or impossible to replace? Well, there's almost nothing that is impossible to replace depending on how specific you are to a brand. how specific you are to a brand. There are lots of great non-tariffed dairy products, lots of great Canadian products, we're still importing products from Europe. So yeah, unless you're stuck on a specific old cheddar from Wisconsin, you're going to be able to have some choice. On oranges, Florida represents an increasingly smaller portion of the Canadian citrus market.

And so you can buy grapefruit from Turkey, oranges from Morocco, oranges from South Africa. We're also bringing a lot of frozen orange juice concentrate in from South America. It's being reconstituted here. So if you're stuck on fresh squeezed Florida orange juice, then in that circumstance, it's gonna be hard to substitute. If you're willing to look at reconstituted orange juice that is packaged in Canada with

Canadian water, then there are going to be choices. It really depends on the specificity. I think Tu also made a good point that you can switch to other products. We have apple juice in Canada if you're going to switch away from orange juice. In the winter, you know, we have stored Canadian carrots and those sorts of things that we can switch to. So I would argue that there's almost nothing that isn't replaceable, but that you, it's the degree of willingness you are to make those changes.

We as Canadians are creatures of habit. So if something's in your basket last week, it's likely to have been in your basket this week. Stuart, I am curious. I want you to pick up on some of what Mike said, but I am curious when we talk about alternatives, sometimes that could lead to potentially costing a little bit more.

And I think there's this thinking that Canadian goods usually are more expensive. Is that the case? Yeah, sometimes, sometimes they're not. You know, and we are entering a moment where we are growing a lot more in Canada, right? We've hit the summer so there will be more Canadian produce on the shelves that could bring prices down. Often does for some of the perishable stuff, right? And as we were just talking about, you know oranges and other citrus from Egypt and other parts of the perishable stuff, right? And as we were just talking about, you know, oranges and other citrus from Egypt and other parts of the world, I mean, that stuff is often cheaper, right? So, you know, it's not necessarily going to result in higher prices by having people buy Canadian.

I'd also like to point out, too, that we've got to keep in mind that these, and this is where I have a problem with this tariff logo that's going on at Loblaws, is that these importers, right, sometimes it's Loblaws, they import directly from US producers, sometimes it's a middleman, middle company, the wholesalers or the suppliers, they're paying the tariff on the wholesale price, right? So they're paying it on a lower value. And there's no reason why we should expect goods to go up in price at the grocery store by 25% or whatnot.

Right? So it's going to be passed on along the supply chain, right? Not just directly 25 to the consumer. And there's a lot of ways that grocery stores can handle this so that we're not actually feeling the price at all. And so this is the problem I have with Loblaws' tariff logo is it's a bit misleading, it's a bit confusing for something that is going to be very moderately affecting their profits, I would say.

Like we've mentioned, the tariffs are not actually on a lot of food products and there's a lot of exceptions, especially for food brought in that's reprocessed in Canada. There's a remission program now. So there's a lot of confusion going in here that I think we could avoid for the consumer. And the tariff logo for me just adds an element of confusion that's not really necessary. All right. Carl, I am curious. I want to pick up on that with, I'm not lobbless, but let's talk Walmart, because Donald Trump has suggested that Walmart should eat the tariffs, his words. Could grocery stores absorb the cost and maybe pick up on sort of what Stuart was saying?

Well, I think there's two answers to that. The first one is that the whole point of the retaliatory Canadian tariffs is to try and weigh upon American business and farm interests to persuade the Trump administration to not continue with tariffs against Canada. So that's kind of the first principle. administration to not continue with tariffs against Canada. So that's kind of the first principle. And obviously, if those vendors from the US are not prepared to then swallow that tariff themselves and it goes on the grocer, and then there is no pass-through to the consumer,

then there's no net effect of what the Canadian retaliatory tariff was supposed to achieve, because all that's happened is that the grocers have then swallowed it, essentially by dropping their ability to make a profit. So it wouldn't actually work in the sense of its intention by the federal government, which is to actually see either lower volumes coming from US vendors, or that US vendors

or that US vendors are not able to obtain this higher product for their markets. So that's the first part. Now the second part is, I think it's important to understand that roughly speaking, grocers make about 3.5% net profit on their sales. And in fact, it's more like 2 to 2.5% with respect to food items.

They make a bit more on health and beauty and some of the allied elements in their portfolios. So if you are looking at roughly 10% of their skews, if you like, are coming from the US side, facing 25% tariffs at the wholesale level, then that is an absolutely massive amount for grocers to swallow relative to their profitability. And gross or profitability is in the zone of two to two and a half percent on food. That compares to three to five times that level at the manufacturer or vendor level. So I don't know why people would then necessarily presume that the, that the grocers should, should swallow that hit. But I go back to the point that unless some pressure is

created on the US side, then all of these countervailing tariffs will have been up to no effect. So I don't think having grocers swallow it does anything whatsoever to achieve the government's goal. Stuart, I think I want to get your response on that as well. And is it unreasonable to think a corporation should forgo large profits to keep prices lower? Well, I think we should be honest. I mean, grocery profits are higher than they were

prior to the pandemic. This is something we haven't seen across other industries, right? So food producers, others have gone back to pre-pandemic levels of profits. Grocery stores are actually making more, right? So they've kind of stabilized at a higher level. So I do think there is more padding. I would push back on there. I'd say there's more padding to eat this. I do agree though that the tariffs are there for a political reason.

They're there to put pressure on producers in the United States. But again, if you're a grocery store and you wanna help do that, you do kind of push, go back to the producers and push back in that sense, right? If pain is going to remain in the United States, then let's keep it in the United States and make sure that Canadian consumers are not paying the price of that. I think when I say that these retaliatory tariffs are not affecting

a ton of food products, they're not really going to affect Canadians that much. I really do think that they have been selected carefully so that there are alternatives for consumers at the end of the day. And that's the point. So just to reinforce that idea, yeah, by all means, let's put more pressure on producers in the United States, keep the price increase off of consumers in Canada. And I do think there's a lot of padding in grocery store profits to make that happen. All right. Two, I want to talk supply chains.

You know, you talked about the Buy Canada movement, but a lot of people have talked about sort of how do we bolster, you know, production here. Are grocery stores starting to establish new supply chains, new relationships, perhaps not necessarily north-south, but east-west? Absolutely. I think on an international level as well, because of tariffs. And I think more importantly, it's the uncertainty of things changing at any day,

at any moment. A lot of grocery stores and businesses in general have been trying to find alternative suppliers from different countries. So for example, buying oranges from Morocco instead of the Florida. That's an example. And while this results in higher costs at the beginning when you sign new contracts, when you

figure out transportation, how do we get goods from A to B, in the long run I think it bolsters resilience of the Canadian supply chain. Now in terms of east to west there are policy initiatives to achieve that, right? So I think in many, many decades we haven't seen such a willingness between provinces and with the federal government to work together to remove inter-provincial trade barriers. Earlier this month, Ontario and Manitoba. Exactly. And hopefully we'll see BC wine in LCBO soon and vice versa. And there's no reason why it shouldn't be, right? We were having California wines in LCBO for a very, very long time.

And so those things will help the Canadian economy, Canadian businesses, and will help our economic growth overall. All right. Mike, I want to get your take on that as well. Supply chains, what are we seeing there? And we'll pick up on the inter-provincial trade barriers. We saw Ontario and Manitoba sign an MOU, a Memorandum of Understanding,

to get those trade barriers down. What are we seeing in terms of those new relationships and new supply chains going, perhaps, east-west? Well, I think there will be some increased movement east-west. What we have to remember is that the reason we've seen this north-south alignment is that it makes sense economically. When the border is relatively open with minimal tariffs, it makes more sense for product to come from Eastern Canada to Eastern US and vice versa and in the West that it be oriented the other way.

So we need to think about, I think Tu is right, that internationally may actually work easier in the short run, not only because of provincial barriers to trade, but because of infrastructure to move product East-West in Canada. So will it happen more? Yes. The uncertainty means that I think people are holding their breath a little bit

to see exactly what the best way to address this issue is. But without a doubt, we are seeing a move not only on the part of grocers but regulators to to find other sources for products so that we are not as dependent on the US and our supply chain becomes more resilient not only in the face of tariffs but also in the face of of increasing weather uncertainty and other things I think that diversification is overdue. All right, the New York Times recently noted that, quote, a variety of populist-minded thinkers

across the political spectrum think that there may be grounds for concern about price gouging. So Stuart, I'm going to come to you. Do you think it's likely that companies will use tariffs as a sort of pretext to raise prices more generally? Is this sort of a scary place to be? It's so hard to tell, right? And we've mentioned this already in the past few minutes.

It's very difficult to know why certain things cost certain amounts. I think it's possible that price gouging in some circumstances could be an issue and that could be simply that a company maybe pretends that a tariff applies when it doesn't and applies a 25% rate. Again, this is something that can be checked on tarifftracker.ca if people want to be very vigilant about that, but it's difficult to tell. I mean, certainly we saw evidence of certain elevated prices or maybe some opportunistic pricing during the pandemic and the post-pandemic supply chain shocks, right, even after things had settled down a bit. So, you know, again, it's hard to know when this is happening. I think this makes it extra important for

government to be thinking about keeping an eye on companies and they can do that again. Maybe we want to expand the powers of the competition bureau to look into things like that. But it's hard to know is the short answer. Carl, if and when, I think I'm maybe getting ahead of myself here, if and when counter tariffs are lifted, is it likely that prices will come down again or is this what we can expect? I certainly want those goods that are directly affected by tariffs. I mean, you bear in mind

that a lot of the prices that have gone up are due to commodity change. That's certainly true with coffee. It's true with cocoa and that goes into chocolates. So there are a bunch of other factors and two, it certainly mentioned some of those. So those wouldn't be directly affected. But with respect to the tariffs themselves being lifted, all the other things being equal, certainly we would then see prices come down. I am curious, do companies ever lower prices

after certain pressures have been lifted? Well, I think it's rare in terms of food. Gasoline prices for sure go up and down all the time according to global oil prices. With food and prices in general, so inflation refers to the rate of increase right? When inflation goes down we expect the rate of increase of prices to slow down, so for prices to stabilize rather than downright going down. In the case of tariff, it's possible but remember that 25% tariffs on certain imports, that's only a fraction of what ends up in the final price that does not again include transportation costs, electric city,

labor costs of having people in the grocery store and whatnot. So in the end that might lead to a 25% tariff might only result in a five to 8% increase in price of something. When that's removed, it's possible for grocery stores to lower the price. But again, it goes back to transparency and competition.

We don't know if they actually do. All right. Mike, I'll get your take on that as well. Well, I think we've seen evidence of prices coming down. If you look at the monthly rate rather than the annual rate, we saw dairy products came down in price last month. We saw some other products come down in price in the last month. We've saw some other products come down in price in the last month. I think a perfect example of prices going up and down was olive oil a couple of

years ago. The Mediterranean basin had a particularly bad year for olives, I think 60% yield reduction, so 40% production. And so the price of olive oil went through the roof, exacerbated by the war in Ukraine and the loss of sunflower oil. And since that time, last year was a much better year for olive oil, and we've seen olive oil come down substantially in price. Is there some stickiness? No doubt.

But I think if you look at them on a monthly basis, things do go up and down, and that's probably not reflected in the aggregate number as much as it is reflected in individual things. We often forget that food price inflation is a blend of many, many different products, and some of those products go up and some of those products go down. On average, they continue to go up, but I think there is evidence that we've seen some prices come down as factors have changed. Alright, Stuart, I'm going to give you the last question, a bit of a hard one, because I'm going to ask you to kind of look through your crystal ball, which I know is kind of hard to do in these unpredictable and uncertain times. But I'm hoping we can leave on some hope here for, you know,

just for some consumers who are kind of getting caught up in these headlines left, right and center. It changes every other day. But what can we expect, you know, kind of down from months or days down from here in terms of prices? You know, we talk about a food insecurity crisis. This is predates. This is Trump administration in January.

But where do they go from here as consumers? This is a really tough question. And it gets beyond food prices, I think. And it isn't one where we have, I think, a very optimistic view of things. So food prices, yes, are high and seem to be growing, at least in the past few months, growing faster than inflation in other products. But the cost of living crisis in Canada is about more than food prices. And these tariffs, these retaliatory tariffs on

US products in a limited number of areas of food, they are the least of our concerns, right, in terms of cost of living. There's a lot we need to be doing as a society to bring down other costs in our rental costs, for example, which are through the roof and as a factor of our expenses are much higher than they've ever been housing prices, energy has been high as well. So in terms of bringing those other costs down for Canadians, that's the real challenge. If there is any bright side of this, I go back to maybe the leverage that this court ruling in the States gives to maybe Canada, Mexico and others. There are efforts to bring down

tariffs across the board on other products like steel and aluminum and automobiles and maybe easing the trade tensions with the United States. That's going to ease pressures that are on investment in Canada, investment by Canadian firms, by foreign firms into production, new jobs here in Canada. So really getting over that hump, I think, will start to see the economy picking up a little bit more. And that could have some bright news on the horizon. All right, well, we are going to leave it there.

I want to thank everyone so much, Karl, Stuart, Mike, too. Thank you so much for joining us and for your insights. Thank you. Thank you for having me. Have a great day.