While the tariffs proposed by President Trump are delayed after the United States struck last-minute deals days ago between Mexico and Canada, convenience stores are keeping an eye on the situation.
“We are watching the tariffs closely, but it is a little early to know exactly what impact they will have,” Robin Cooper, public relations manager at Ballston Spa, New York-based Stewart’s Shops, told CSP. “Stewart’s and our customers are all aware how much costs have risen over the last few years, and we remain in constant conversation with our vendors about this situation.”
Nik Modi, managing director at Toronto-based RBC Capital Markets, said, “I think Trump will pause the tariffs for one month and then completely eliminate them in one month as his demands will likely be met … LOL.”
Richard Poye, founder of Nashville-based Food Trends Think Tank, said for c-stores to stay competitive if tariffs are imposed, it is essential to understand whether the supplier absorbs all the tariff costs, passes all those costs to the retailer or shares the burden.
“This is when existing collaborative supplier/retailer relationships pay off,” Poye said. “Assess how tariffs impact in-store pricing, consider where consumers will see immediate price increases and then work through the potential repercussions to transactions/market basket.”
With 2024 inflation at 2.7%, he asked what impact would the tariffs have on future inflation and the costs of products that are not imported? “The basic assumption is that tariffs would drive inflation higher,” he said.
$210.9 Billion
The tariffs on Mexican and Canadian goods would translate to an added cost of $210.9 billion for imported goods, which is about $620 per person or $2,481 for a family of four per year, Poye said.
“This increase will negatively impact the bottom lines of businesses and, more importantly, be a significant burden to the wallets of U.S. consumers and affect how each will consider future spending,” Poye said. “One thing is clear: Mexico and Canada aren’t paying for tariffs—U.S. businesses and consumers are.”
Depending on which country is hit with tariffs, the impact will vary as to which category or categories are affected, Poye said. “If tariffs were on Mexican products, then I would predict significant challenges with beer, packaged beverages, bakery, snacks, candy and foodservice categories,” he said.
“If Mexico and/or Canada are hit with tariffs, I would be most concerned with the beer category in convenience retail, which has the potential to see the most immediate cost increase, he added. “Because of menu variances and ingredient sourcing, foodservice has a level of complexity that could be very challenging and vary significantly from retailer to retailer.”
Reduce Basket Size
With consumer spending already under significant pressure, he said, increasing prices has the potential to drive down basket size and reduce transactions.
“Substantial price increases on imported Mexican items could damage categories that are overly reliant on imported goods,” Poye said, adding that non-tariffed items in the same category might not have the supply chain flexibility to support the increased demand for their products.
Poye recommends that c-store retailers check their contracts to see if tariffs nullify negotiated pricing.
“On the other hand, now might be the time to lock in on long-turn pricing to establish some form of pricing stability, including domestic products,” he said.
Poye added:
- Focus on meeting customers’ anticipated needs and become the trusted retailer because customers will change their purchase habits.
- Be very transparent in your pricing communication. This is a time to explain to customers why prices are going up. It might also be a time to become more competitive in pricing.
- Meet with one’s most important supplier partners, have pragmatic conversations and craft potential ways of working plans in case tariffs are imposed.
Poye also recommends that retailers:
- Identify the immediate repercussions on your businesses and customers if tariffs were enacted. Get ahead of the game; work out various scenarios now before any actual tariffs are put in place.
- Define steps for how one’s business will be able to quickly respond to imposed tariffs (or similar challenges) on core products your company sells or utilizes.
- Identify which suppliers will be immediately impacted by tariffs and which ones might take longer to be affected.
For example, he said, “If Mexican imports are hit with tariffs, then Mexican beers would be immediately impacted, while American-made beers might take longer to be affected because while the beer is made in the U.S., the can might be made in Mexico, and the cost of the packaging would be affected.”
Tobacco, Beyond
On Monday, e-cigarette manufacturer Juul, Washington, D.C., issued a statement in support of President Trump’s package of tariffs.
The company said it “commends President Trump’s efforts to protect American citizens through increased enforcement of trade laws and border security.”
Juul said Trump’s tariff policy includes closing the “so-called ‘de minimis’ tariff loophole, which allows Chinese exporters to smuggle products into the U.S. with scant oversight or inspection.”
The e-cigarette company went on to add that “over the past four years, criminals have used smugglers’ tactics to exploit this loophole and flood the U.S. with illegal Chinese vapor products, which now account for approximately 70% of the market.”
Juul said that this “key provision of the America First Trade Agenda empowers our law enforcement agencies to stop the flow of illegal Chinese vapor products and further secure our border.”