Canadian food businesses could face higher input costs and pressure on profit margins as new counter-tariffs on U.S. goods work their way through the food supply chain, says Dalhousie University food industry expert Sylvain Charlebois.
Charlebois, director and professor at the university’s Agri-Food Analytics Lab, said the latest Canadian tariffs are focused more heavily on ingredients and other inputs than last year’s measures, which directly targeted consumer-ready products such as coffee and tea.
The shift means the effects on consumers are expected to be less immediate, although Charlebois said food inflation could rise by as much as 0.3 per cent by April or May 2027 if the counter-tariffs remain in place.
He also expects food manufacturers to respond to higher costs through shrinkflation, where package sizes are reduced rather than prices increased.
Bakery products and dairy are among the food categories most exposed to the new tariffs, Charlebois said. More than $300 million worth of baking goods were affected, potentially forcing Canadian bakers to pay tariffs or find alternative ingredients from other countries at potentially higher costs.
Dairy processors also face challenges because Canada imports more than $1 billion worth of dairy proteins and whey products. Finding alternative international suppliers can be more difficult because of food safety and logistical considerations.
Charlebois expects retailers to resist immediate price increases, putting additional pressure on processors to reduce costs or shrink product sizes.
He said the ongoing trade dispute could also intensify pressure on Canadian manufacturers already facing difficult economic conditions. Companies moving production to the United States is a growing concern, he said, pointing to recent moves involving Sapporo and Diageo.
Charlebois also expects Canadians’ preference for discount retailers to continue and said the trade dispute could strengthen support for Canadian-made products, particularly those produced by Canadian-owned manufacturers.