Canadian Restaurants Avoid Broad Food Tariff Hit as Supply Costs Face Pressure

Date:

Share post:

Canada’s restaurant industry has broadly welcomed the federal government’s latest retaliatory tariff package after many food products identified as priorities by the sector were kept out of the new measures. Restaurant operators could still face higher costs for packaging, equipment and selected ingredients as the tariffs work their way through supply chains.

The federal government announced Tuesday that Canada will impose counter-tariffs of 15%, 25% and 50% on $27.6 billion worth of U.S.-origin imports beginning September 8. The measures respond to the latest round of U.S. tariffs and cover products across a wide range of sectors.

Restaurants Canada said the approach addresses some of the industry’s biggest concerns about retaliatory measures adding another layer of pressure to food costs.

“We appreciate that it has listened to the concerns raised by our industry and avoided tariffs on many of the priority food products we identified,” said Kelly Higginson, President and CEO of Restaurants Canada.

The association said avoiding many of those products should help limit additional pressure on food costs and menu prices while reducing potential disruption to Canada’s food supply chain. That relief is significant for restaurant operators, although food products have not been entirely excluded from the tariff package.

Certain U.S.-origin dairy products, including a range of cheeses, are subject to 25% tariffs, while some whey products and selected food preparations face higher rates. The tariff list nevertheless avoids broad duties across many staple restaurant ingredients that could have produced a larger and more immediate cost increase for the industry.

Packaging Emerges as a Key Concern

Restaurants Canada’s initial review identified packaging as one of the areas requiring further attention, and the federal tariff schedule includes several products commonly used across the foodservice industry.

Certain U.S.-origin polyethylene sacks and bags are subject to a 50% tariff, as are categories covering plastic tableware and kitchenware. Paper and paperboard products are also captured, including certain corrugated cartons, boxes, paper sacks and bags. Several of those categories face tariffs of 50%, along with certain aluminum foil products.

The impact on individual operators will depend on their supply chains and the ability of distributors to source comparable products from Canada or other countries. Restaurants that rely directly or indirectly on affected U.S.-made supplies could face additional costs once the tariffs take effect.

Quick-service, takeout and delivery-oriented businesses may be particularly sensitive to changes in packaging costs because disposable containers and related supplies represent recurring expenses. Even relatively small increases can become meaningful when multiplied across large transaction volumes.

Restaurants Canada said it is assessing the affected products and plans to seek targeted exemptions where sufficient Canadian or alternative supply is unavailable.

Restaurant Equipment Also Faces Exposure

Equipment represents a different potential source of cost pressure. Canada’s tariff schedule includes a range of refrigeration and freezing equipment, with several categories subject to 25% tariffs, while certain refrigerated cabinets, counters, showcases and related equipment face rates as high as 50%.

Selected ovens, ranges and electric cooking equipment are also included, along with various kitchen products and equipment components. Tariff classifications are highly specific, so the measures should not be interpreted as applying to every refrigerator, oven or piece of commercial restaurant equipment imported from the United States.

For operators purchasing affected products, the tariffs introduce another consideration when replacing aging or failed equipment, renovating locations or building new restaurants. Kitchens, refrigeration systems and other specialized equipment can represent significant capital expenditures, making alternative suppliers increasingly important where U.S.-origin products become more expensive.

“There are still some important issues to address, and we will continue working with government to get those right,” Higginson said.

Restaurants Operating on Narrow Margins

The potential increases come as Canada’s foodservice sector continues to contend with a challenging cost environment.

Statistics Canada reported that food services and drinking places generated $99.6 billion in operating revenue in 2024, up 4.8% from the previous year. Operating expenses reached $95.5 billion, leaving the sector with an operating profit margin of 4.1%.

Cost of goods sold represented 35.9% of industry operating expenses, while salaries, wages, commissions and benefits accounted for another 33.6%. Rental and leasing costs represented 8.1%.

Those figures help explain why incremental increases across several expense categories matter. A 25% or 50% tariff on an individual product does not translate into an equivalent increase in a restaurant’s overall costs, but higher expenses for packaging, ingredients, equipment and transportation can accumulate within businesses operating on relatively narrow margins.

Restaurants Canada has also reported continued profitability concerns among its members and expects inflation-adjusted commercial foodservice sales to decline by 1.1% in 2026. The association reported earlier this year that 44% of restaurants were operating at a loss or breaking even as of November 2025.

Consumers Remain Focused on Value

Passing higher costs directly to customers presents its own challenges. Recent Restaurants Canada research found that more than eight in 10 Canadians consider affordability at least a moderate factor when choosing a restaurant, while half of quick-service customers surveyed said they actively look for promotions, discounts and deals.

Menu-price inflation has also been moderating. Restaurant menu prices increased 2.7% year over year in June, according to research released by the association, representing the slowest pace of increase since 2021.

Restaurants facing higher input costs can attempt to recover some of those expenses through menu pricing, but significant increases risk affecting traffic when consumers are actively seeking value. Avoiding widespread tariffs on high-volume food ingredients therefore removes one potential source of immediate inflation, while exposure to packaging, equipment and selected foods will vary considerably by operator and supply chain.

Restaurants Canada to Pursue Tariff Relief

Restaurants Canada plans to continue working with Ottawa as the impact of the tariff package becomes clearer, including seeking relief for products that cannot readily be sourced elsewhere.

Canada’s existing tariff-remission framework allows the federal government to consider requests where affected goods cannot reasonably be sourced domestically or from non-U.S. suppliers. Relief can also be considered in exceptional circumstances where tariffs could create severe adverse effects on the Canadian economy.

The process could become important for specialized foodservice products where operators, distributors or suppliers have limited ability to quickly change sourcing.

Fuel Costs Add Another Layer

Restaurants Canada is also asking Ottawa to extend the temporary suspension of the federal fuel excise tax on gasoline and diesel beyond September 7. The request comes as the new Canadian counter-tariffs are scheduled to take effect September 8.

The federal excise tax is normally 10 cents per litre on gasoline and four cents per litre on diesel. Its scheduled return would add another cost consideration as restaurants and their suppliers adjust to the new tariff environment.

Fuel costs can move throughout the foodservice supply chain as food and restaurant supplies travel from producers and processors through distributors to individual locations. Restaurants Canada reported in July that 86% of operators surveyed were experiencing higher food and ingredient costs associated with rising gasoline prices, while the same percentage reported supplier fuel surcharges. Another 81% reported increased operating expenses.

The association is encouraging Ottawa to maintain the fuel-tax relief as businesses manage the broader economic effects of the Canada-U.S. trade dispute.

Tariffs Could Accelerate Sourcing Changes

The measures may also prompt restaurant operators, distributors and suppliers to reconsider where affected products are sourced. Canadian-made packaging, equipment and other supplies could become more attractive where sufficient domestic production exists, while importers may look to suppliers in other markets for products currently sourced from the United States.

Changing suppliers can take time. Restaurant chains can have detailed requirements around packaging dimensions, branding, equipment specifications, warranties and food-safety standards, while specialized products may have relatively few readily available alternatives. Those constraints will help determine which tariff categories ultimately create the greatest pressure for operators.

Canada’s restaurant industry represents approximately $125 billion in economic activity and directly employs about 1.2 million Canadians, according to Restaurants Canada. The association says restaurants purchase approximately $43 billion in food and beverages annually, including roughly $30 billion from Canadian suppliers.

“Restaurants are behind the government in standing up for Canada in this trade fight,” Higginson said. “Our focus is on ensuring Canada’s response is as targeted and effective as possible, recognizing the impact these decisions can have on Canadian businesses, jobs, communities and consumers.”

The industry appears to have avoided the broad ingredient shock that could have resulted from tariffs across a much wider range of food products. As the measures take effect September 8, attention will turn to packaging, equipment and selected food categories, along with whether alternative sourcing or targeted tariff relief can prevent those additional costs from spreading further through Canada’s restaurant supply chain.

More from Retail Insider:

RELATED ARTICLES

Subscribe to the Newsletter

Subscribe

* indicates required

RECENT articles

Dollarama Q2 sales increase 17.6% y/y to surpass $2 billion

Net earnings increased by 8.7% to $349.3 million in the second quarter of fiscal 2027, compared to $321.5 million in the second quarter of fiscal 2026.

RCC Names Walmart and SC Johnson Executives Inaugural Sustainable Leaders of the Year

Retail Council of Canada names Walmart’s Kathleen McLaughlin and SC Johnson’s Fisk Johnson its inaugural Sustainable Leaders of the Year.

RBC says grocery prices likely to keep rising faster than overall inflation in near term

The report said the largest recent spike occurred between 2021 and 2023, when grocery inflation reached its highest level since the early 1980s and food prices rose 11 per cent year-over-year in late 2022.

Canadian businesses face rising debt, payment stress: Equifax

Average commercial debt per business rose 7.3 per cent year-over-year to $30,581, while the 60-plus-day delinquency rate on financial credit products reached 4.0 per cent, its highest level since 2019 and a 19.7 per cent increase from a year earlier.

Daily Synopsis: September 15, 2026

Canadian companies look to capitalize on 'elbows up', Circle K capitalizes on back-to-school rush, No Frills takes North York No Frills, London Drugs launches community pharmacies, Costco opening 4 Canadian stores, and other news.

Nespresso opens new experiential kiosk in Montreal’s Royalmount

The concept is inspired by Nespresso’s collaboration with Dua Lipa and its “By the Pool” campaign, bringing a colourful, summer-inspired and immersive experience to the shopping centre.

Criterion Establishes Permanent Toronto Retail Presence After Strong TIFF Demand

The Criterion Collection establishes a permanent Canadian retail presence at Cinema Cellar in downtown Toronto following strong demand from its TIFF activations.

Holiday shopping starts earlier as retailers face growing mobile, AI customer-experience risks: Quantum Metric

As retailers roll-out new app campaigns, AI-driven features and discovery tools, they’re also introducing more opportunities for friction across the digital shopping journey.

LEGO Expands Canadian Store Network with Three GTA Locations

The LEGO Group is increasing its Canadian store network by 25% this fall, adding three Greater Toronto Area locations in what the company describes as its largest Canadian retail expansion in more than five years.

Constant Contact launches real estate marketing platform in Canada

The platform is now built for the entire Canadian real estate ecosystem — associations, MLSs, brokerages, franchises, teams, and agents — with connected, relationship-driven marketing

Walmart Canada Builds Supercentre Pipeline as Retailer Targets Malls and Growing Communities

Walmart Canada is expanding its Supercentre pipeline through 2028, targeting former department store spaces, growing communities and grocery expansion as part of its $6.5-billion investment.

Circle K, Couche-Tard launch app-based rewards campaign tied to customer visits

The Road to Rewards promotion runs from Sept. 15 to Nov. 9, and is the company's first app-integrated, visit-based campaign, according to Circle K Canada.

IKEA Canada marks 50th anniversary with new campaign focused on products’ role in everyday life

When IKEA opened its first Canadian store in 1976, home life looked very different than it does today.

The high cost of doing business in the restaurant industry: EconoLease

EconoLease’s 2026 Hospitality Operator Report found that restaurants’ most critical equipment breaks down the most, and many operators say they can’t afford to upgrade or replace it.

How Premium Brands Defend Pricing as Products Become Easier to Copy

Why can some brands still charge premium prices when cheaper alternatives are everywhere? Justin Walford examines Canada Goose, Aritzia and Arc’teryx.

Nearly two-thirds of working Albertans feel less financially secure than a year ago: Money Mentors

62 per cent of working Albertans feel less financially secure than they did a year ago, compared with 49 per cent nationally. Only 14 per cent said they are more financially secure.

Khloé Kardashian fragrance portfolio expands into Sephora in U.S. and Canada

The products will be sold in 1,300 Sephora U.S. and Sephora Kohl's locations, while Sephora will be the exclusive retailer for the fragrances in Canada.

Daily Synopsis: September 14, 2026

Italian brands launch in Canada, Maple Leaf Foods brings back Yves Veggie Cuisine, Article opens Toronto store, food inflation runs higher in Canada vs. US, Empire opening stores, and other news.

Maple Leaf Foods Revives Yves Veggie Cuisine After Brand Was Discontinued

Maple Leaf Foods is bringing Yves Veggie Cuisine back to Canadian grocery stores after acquiring the plant-based brand following its 2025 discontinuation.

PC Health launches new “Built in Canada for Canadians” AI-powered health chat

New research commissioned by PC Health found that 88 per cent of Canadians searched online for health information in the past year, yet nearly half (46 per cent) remain unsure whether the information they find is accurate, one-third (33 per cent) encounter conflicting advice, and more than one-quarter (26 per cent) say there is simply too much information to sort through.