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Financial planning tips

July 26, 2018

U.S import tariffs: What you need to know before your next grocery shop

Could buying products “Made in Canada” help you avoid import tariffs and paying more on your grocery bill? Here’s what you need to know about those product labels.

With the ongoing U.S.-Canada trade difficulties creating concerns over the cost of some imported goods, many Canucks are looking to save money and (sometimes) make a statement by supporting Canadian brands, producers and suppliers. But even if you’re keeping an eye out for that “Made in Canada” label, it might not mean what you think it does. And what about companies that aren’t Canadian-owned, but manufacture goods here? How do tariffs on  U.S. imports to Canada affect them? Here’s what you need to know.  

Which products are subject to the U.S. import tariffs?

The U.S. recently stated it intends to impose a 25% tariff on imports of steel and a 10% tariff on aluminum. In response, the Canadian government has slapped a 10% tariff on these U.S.-made products: coffee, ketchup, orange juice, yogurt, salad dressing, mayonnaise, chocolate, whisky, cucumbers, licorice, toilet paper, strawberry jam, flavoured water and maple syrup. (In all seriousness, though, why would you buy American maple syrup? It’s a Canadian icon.)

To understand how this could change your daily, weekly or monthly shopping habits, it helps to know how these tariffs work.

How are the U.S. import tariffs applied?

Import tariffs are applied whenever selected goods or products enter the country that’s applying the tariff. They’re paid by the manufacturer, which passes that increased cost along to consumers in that country. These tariffs focus on where the final product – not the parts or ingredients – is manufactured, and apply only if a product is crossing the Canada-U.S. border. They aren’t affected by the manufacturer’s country of origin.

Still unsure how it works? Let’s take a much-loved beverage on the 10% tariff list: orange juice. Since oranges don’t grow in Canada, does this mean Canadians will pay more for all American brands of orange juice? Not necessarily. Rather than aiming at where a manufacturer is owned, import tariffs are aimed at where a product is made. With this in mind, we know that Canadians won’t be subject to tariffs on Minute Maid Orange Juice. Why not? Because despite being produced by an American-owned corporation and made from oranges grown in the U.S., Minute Maid OJ is prepared and manufactured in Canada. The finished product doesn’t cross the border, and so no tariff applies. On the other hand, Tropicana is a U.S.-owned company that processes and manufactures its products in the States. Consequently, its orange juice would be hit with the tariff at the border and hiked in price by the time it reaches your grocery aisle.

Does this make all “Made in Canada” products safe from the wrath of import tariffs? To answer this, we have to look at what being “Made in Canada” really means. 

What does “Made in Canada” mean?

Many goods are labelled “Made in Canada,” but they’re not entirely made here. The label means that more than half of the total cost of manufacturing or production was spent in this country. Look closely at the fine print. You’ll notice that these three little words are often accompanied by a qualifying statement, such as “Made in Canada with Imported Ingredients [or Parts].” The label doesn’t usually specify where these imported ingredients came from, but it does mean the completion or finishing of a product happened here.

Alternatively, you might see the label “Prepared in Canada” on the tail end of a product label. Similar to “Made in Canada,” this means the food or item was prepared here, but its ingredients may have come from another country.

Labels like “Made in Canada” and “Prepared in Canada” mostly refer to place of manufacture and don’t take into account the ownership of the manufacturer. For instance, French’s ketchup can use these labels because even though brand-owner McCormick’s is a U.S. company (which bought French’s not long ago from Reckitt Benckiser in the U.K.), its products are made here.

For the most part, items made or prepared here won’t have to deal with tariffs. But if any of the ingredients used in a product are subject to a tariff, then that could lead to a price hike in the end product. If there was ever an import tariff on oranges, for example, it would mean that prices would not only go up on oranges coming in from the States, but also on any food items that contain those oranges, such as juice, sauces, baked goods, etc.

So, what should you do if you want to go all-Canadian – in regards to ownership, raw materials and manufacturing – on your purchases? Take note of the “Product of Canada” label. Items with this label are produced and manufactured almost entirely (at least 98%) in our nation.

How to avoid price hikes on your grocery bill

Tariffs invariably lead to price hikes, but there are ways to dodge them and save money in the process:

  • Comparison shop. If your priority is to cut back on your grocery bill, then a simple price comparison at the supermarket should have you covered. Check the prices on all brands of any given product and go with the cheapest. You can even consider a house brand or a generic version. Generic or house brands like No Name or Selection are less expensive and often contain the same ingredients as their name-brand counterparts. Online grocery shopping is another great way to comparison shop and be mindful about how you’re spending. Read about more reasons to click before you cook in: Why try a grocery delivery service?
  • Shop at your local farmers’ market. Your local farmers’ markets tend to have the freshest, in-season fruits and vegetables, locally grown and often organic. Shopping at a farmers’ market also helps your local Canadian farmers thrive in the increasingly challenging agricultural industry. Want to incorporate more of nature’s bounty in your diet? Check out 4 easy ways to eat more vegetables this summer.
  • Make it yourself. There are some items on the tariff list that are easy to make yourself – for even less cost than store-bought goods with no tariff. Whip up your own salad dressing with olive or canola oil, lemon juice or vinegar, some fresh or dried herbs, a little honey or maple syrup, and perhaps a bit of mustard to keep the oil and vinegar from separating. Drop some lemon slices or berries into a pitcher of water instead of buying pricey, flavoured H2O in a plastic bottle. Get creative in your kitchen.
  • Look for alternatives. Even if some of your favourite brands are manufactured in America, remember that plenty of great products are made right here in Canada. Need a replacement for American-made Heinz ketchup? Go with French’s or President’s Choice. Pining for Peanut Butter Cups? Nestlé makes Coffee Crisp, Smarties and Kit Kat in Toronto. Your options are endless.

For more ideas on how to cut back your grocery bill while still eating nutritious food, check out 10 tips for eating healthy on a budget. For more on making sense of product labels, read How to decode the nutrition label.

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