How Food Manufacturers Are Restructuring Supplier Networks to Absorb Tariff Costs – Image for illustrative purposes only (Image credits: Unsplash)
Tariff costs from 2025 trade policies are still working their way through food supply chains, with the full financial impact expected to hit between April and October 2026. A January 2026 analysis by SPINS shows these expenses typically lag 12 to 18 months before reaching manufacturers in full. This delay means many companies are only now confronting the consequences of earlier duties on imported ingredients and materials.
Steel and Aluminum Tariffs Set the Stage
Revenue from steel and aluminum tariffs jumped from $1.60 billion in fiscal 2024 to $7.79 billion in fiscal 2025. Canned goods producers and companies using aluminum packaging absorbed much of that increase directly. The exposure has since spread to specialty ingredients where China holds dominant global market share.
Inputs such as citric acid, ascorbic acid, garlic powder, tapioca starch, apple juice concentrate, and certain food dyes now carry higher costs with few immediate domestic substitutes. Qualifying new suppliers for these items requires months of testing for food safety, allergens, and labeling compliance.
Price Pressures Already Visible in 2026
Campbell’s has stated that tariffs will represent roughly 4 percent of its cost of goods sold this year. Hershey’s has raised prices by at least 10 percent to offset cocoa costs that include import duties. The USDA’s Economic Research Service projects overall food prices will rise 2.9 percent in 2026, with beef and veal prices already up 12.1 percent year-over-year as of March.
Manufacturers have absorbed a significant share of these costs rather than passing them all to consumers. Research from the Harvard Business School Pricing Lab indicates consumers shouldered 43 percent of the tariff burden in the first seven months after new levies took effect, while companies covered the remainder.
Three Moves That Create Sourcing Flexibility
Companies gaining the most ground are pursuing geographic diversification, formulation changes, and contract adjustments. A sourcing audit by country of origin helps identify categories where high-tariff origins exceed 30 percent of volume. India, Southeast Asia, Eastern Europe, and Latin America are absorbing shifts in spices, starches, fruit concentrates, and vegetable powders.
Reformulation with domestically available or trade-agreement-covered ingredients addresses both immediate margin pressure and long-term supply risk. The process typically spans six to 12 months from concept through final labeling approval. Contracts are also being rewritten with force majeure clauses, price reopener windows tied to tariff changes, and shorter commitment periods to allow faster supplier switches.
Why Quick Fixes Remain Elusive
Nearly half of U.S. businesses planned to increase nearshoring in 2025, yet geography alone does not solve the timeline challenge. Capstone Partners managing director Brian Boyle noted that finding alternative sourcing and suppliers will likely remain a top focus for food sector participants, with producers also considering formulation changes to reduce reliance on costly raw materials.
Harvard Business School professor Alberto Cavallo observed that most of the consumer pass-through has likely already occurred, assuming tariffs do not increase further. The calculation shifts if duties rise again, and it does not capture the margin compression manufacturers have already absorbed.
Building Resilience as a Standing Practice
Tariff exposure now functions as a permanent feature of the operating environment rather than a temporary disruption. Companies that map ingredient portfolios by origin, maintain active qualification pipelines for alternative sources, and embed flexibility into supplier contracts are better positioned for ongoing trade volatility. Those steps, once completed, reduce both current costs and vulnerability to future policy shifts.
