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US tariffs threaten hard-to-replace food ingredient imports

The latest round of US tariffs is set to raise costs and disrupt supplies of key food ingredients that cannot be grown in the US and are sourced almost entirely from countries now facing some of the steepest import duties.

President Donald Trump’s sweeping trade measures have sent shockwaves through the global economy, with many of the world’s poorest and most trade-reliant countries expected to bear the brunt.

The policy imposes a 10% blanket tariff on all imports to the US, with higher “reciprocal” rates of up to 49% applied to countries with large trade surpluses with the US.

Cambodia, Laos, Vietnam, Madagascar, and others now face steep duties because they export more to the US than they (can afford to) import in return. Trump has framed the move as a fix for trade imbalances.

“We have massive financial deficits with China, the European Union, and many others. The only way this problem can be cured is with TARIFFS,” he posted on Truth Social over the weekend.

Financial markets have reacted swiftly. Stock indexes across Asia posted some of their worst losses in years. Japan’s Nikkei 225 closed down 7.8%, South Korea’s Kospi lost 5.6%, and Australia’s ASX 200 dropped 4.2%.

The Financial Times reported that more than $5 trillion in market value was wiped from the S&P 500 over just two days, marking its worst week since the start of the Covid-19 pandemic. Fears of a wider trade war and global economic slowdown are driving investor panic.

Vanilla imports face steep increases

Vanilla is one of the clearest examples of how the latest tariffs may have an extremely disruptive impact on certain food and ingredient supply chains.

Madagascar, the dominant producer of the commodity, supplies around 78% of US vanilla and now faces a 47% tariff. Vanilla farming in the US is limited to a handful of small operations in Hawaii and some experimental production in Florida, and natural vanilla is difficult to substitute in many applications, especially in premium desserts, dairy, and confectionery products.

Other suppliers may benefit from the policy. Uganda and Papua New Guinea, which also grow vanilla, face a comparatively low 10% tariff. Their exports could rise if buyers shift sourcing away from Madagascar, but the capacity to scale up production is limited.

US importers may also increase purchases through intermediaries, like countries in Europe that can continue to buy vanilla from Madagascar without penalty and then sell it to the US, a practice that already exists in limited form.

Cashew, spice, and coconut prices rise

Cashew nuts, used in snacks, plant-based products, and confections, are highly concentrated in Vietnam, which supplies roughly 89% of US imports. Vietnam faces one of the highest tariff rates at 46%.

As the crop, like vanilla, requires a tropical climate, there is no US cashew production. Alternative suppliers such as Côte d’Ivoire and India face their own substantial tariffs of 21% and 26% respectively. Few exact substitutes exist for cashew’s texture and taste, meaning higher input costs are likely to be passed on to consumers.

A wide range of imported spices is also exposed. Cloves, cardamom, cinnamon, and tamarind are sourced almost exclusively from countries like Indonesia, Sri Lanka, India, and Madagascar. These nations are all now subject to “reciprocal tariffs” ranging from 26% to 47%.

With no commercial US production, these spices are likely to become much more expensive. Their distinct flavours and properties make substitution difficult without altering product identity.

Palm and coconut oils are foundational ingredients in many packaged foods, from baked goods and margarine to confections and fried snacks. Indonesia and Malaysia jointly provide more than 90% of US palm oil imports, and now face tariffs of 32% and 24% respectively. Meanwhile, the Philippines – which, along with Indonesia, is among the top suppliers of coconut oil – faces a 17% tariff.

These oils are not produced in the continental US and are valued for their functional properties, including texture and shelf stability. Domestic oils such as soybean and canola are not direct replacements. Reformulating recipes to avoid imported tropical oils may raise costs or reduce product quality.

Some dietary ingredients exempt, but not food staples

A limited number of ingredients are included in tariff exemptions.

These primarily benefit pharmaceutical and dietary supplement manufacturers. Vitamins A, B-complex, C, and E, coenzyme Q10, choline, several amino acids, and some polyphenols are among the items excluded.

No similar exemptions were made for food ingredients. The Consumer Brands Association, representing major US food manufacturers, called on the administration to adjust its approach.

“There are critical ingredients and inputs that need to be imported due to scarce availability domestically,” said Tom Madrecki, vice-president of supply chain resiliency, in a statement.

“Reciprocal tariffs that do not reflect ingredient and input availability concerns will inevitably raise costs, limit consumer access to affordable products and unintentionally harm iconic American manufacturers.”

Asked last week in a CNBC interview what it would take for a product to be exempted from the new tariffs, US Commerce Secretary Howard Lutnick downplayed the possibility.

“I don’t think the word exemption is going to be a factor. I don’t think that’s such a thing,” he said. “I think what there’s going to be is a world of fairness. Let’s go try to figure out ways for the world to treat us more fairly and more properly.”