Soaring prices of fresh fruits, vegetables, shampoo and toiletries.
It was that fear which gripped the country during the pandemic and one that many Canadians felt again when the trade war with the United States erupted at the start of the year, sparking a wave of predictions about rising prices.
The day after U.S. tariffs and Canada’s counter-tariffs were announced, Loblaw CEO Per Bank was among those sounding the alarm.
“Economically, we know that tariffs by their very nature are inflationary,” Bank wrote on LinkedIn on Feb. 2, pledging that Loblaw would minimize the impact as much as it could. “New tariffs have the potential to put significant pressure on costs, which will ultimately impact consumers directly.”
Seven months on, the Star has taken stock of the tariffs’ impact and found that despite these fears, Canada’s three largest supermarket chains — Loblaw, Metro and Empire — have continued to reap higher profits and report slightly better gross profit margins than last year, deftly weathering the tariff squalls. While grocery prices have crept upward over the past year, the increase has been far milder than many had braced for.
On Sept. 1, Prime Minister Mark Carney moved to lift all tariffs on U.S. goods covered under the United States-Canada-Mexico Agreement, while keeping tariffs on steel, aluminum and automobiles.
Economists note that, before the removal of the retaliatory tariffs, food inflation had climbed from an average of 2.2 per cent in 2024 to over 3 per cent since February of this year, even hitting 3.8 per cent in April — but still a far cry from the double-digit surge of 2022. They caution that tariffs may not be the chief culprit behind the recent uptick.
Compared to the battered auto industry, the three major grocers’ 2025 quarterly reports show they have fared well, if not improved their bottom lines, despite the counter-tariffs, which retailers and some analysts attribute to limited U.S. imports, a flexible grocery supply chain and a firm resistance to suppliers’ price increase requests.
“Tariffs made prices go up. I wouldn’t have expected Loblaws to absorb those price increases,” said Michael Von Massow, a food economics professor at the University of Guelph, adding that counter-tariffs targeted selective goods such as freshly squeezed orange juice, where consumers could easily switch to alternatives.
“So tariffs, I would say, had a negligible impact on grocers.”
Since Trump’s tariffs and Canada’s counter-tariffs were imposed in February, Loblaw, Metro, and Empire (Sobeys’ parent company), which pocket 60 cents of every grocery dollar Canadians spend, have all reported higher gross profits in their most recent quarter compared with the same period in 2024, with profit margins increasing year-over-year by 0.03, 0.16 and 0.93 percentage points.
Loblaw’s retail gross profit margin stood at 32.02 per cent in the second quarter of 2025, which ended in June, the highest for the company in the past five years, according to data contained in the company’s financial statements.
Loblaw spokesperson Catherine Thomas said it is “wrong” to say the margin was the highest in five years, noting that the “reported number is 32.0 per cent” — rounded to one decimal place instead of two — and is unchanged from last year.
“Our gross profit dollars did increase, but in line with our higher revenue, reflecting the more than 60 new stores we’ve opened since last year. Tariffs did not contribute to higher profitability,” Thomas said.
Shortly after the counter-tariffs came in, Metro and Loblaw halved the timeline for reviewing proposed price increases from suppliers — from 12 weeks to six — to better help suppliers navigate the effects of tariffs.
In March, Loblaw placed a “T” symbol on products affected by tariffs to provide “transparency regarding pricing and the application of tariffs.” Massow said the symbols explain to customers why they were paying higher prices and were also an attempt to dispel concerns that the companies were “greedy grocers.” But the downside, he added, is that with Canada removing all counter-tariffs on Sept. 1, shoppers are now watching to see if those prices will come down.
Loblaw estimates that tariffs drove up the prices of 6,000 products — less than 10 per cent of its total stock — with roughly half being food. Metro says 3,000 of its products were affected, while Sobeys’ parent company, Empire, reports that it sourced 12 per cent of its products from the U.S.
Loblaw spokesperson Thomas said tariffs are being phased out in waves as affected products are sold.
Metro spokesperson Stephanie Bonk told the Star in a statement that coffee remains affected because of the cost of raw materials and the fact that finished products are manufactured in the U.S. She added that soft drinks are also impacted, since aluminum used in packaging is subject to tariffs.
The effect of the tariff dispute remains manageable, and prices for products impacted by the removal of counter tariffs will be adjusted over the next few weeks, she said.
“I think tariffs were not as impactful as was maybe predicted at the beginning, primarily because of a relatively small percentage of inputs, and then the ability for customers to switch to non-tariffed items,” said Moritz Steinbauer, the Senior Vice President of Morningstar DBRS, a global credit rating agency.
Customers may be turning to Canadian grocers’ higher-margin private-label products, further offsetting the impact of tariffs, Steinbauer added.
Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association, told the Star that all three retailers have taken a hard stance on approving price increase requests from food suppliers.
“There is no acceptance of increases unless they can truthfully demonstrate where the commodities or the ingredients that are being used are experiencing significant increases,” Graydon said.
Empire’s CEO Michael Medline said in June that the company worked with suppliers to prevent “unjustified” cost increases from being passed on to customers, warning that such increases could make products uncompetitive.
When the Star asked the three major grocers whether they had absorbed part of the costs from tariffs themselves, Metro and Empire did not directly respond.
Loblaw, however, said “as a business, our role was not to subsidize U.S. manufacturers by absorbing tariffs.”
Massow said that if retailers absorbed the costs, they would be punishing their shareholders, many of whom are large pension funds.
“Are they being customer-friendly by passing them on? You could argue that in the short term, they should have absorbed some of that,” he said.
Executives at all three major grocers noted on earnings calls after February that they have seen a decline in U.S. product sales, offset by stronger sales of Canadian goods thanks to the “Buy Canadian” movement, and that they were diversifying their supply sources to include more Canadian and non-U.S. suppliers.
Loblaw’s purchasing team had shifted nearly 25 per cent of its produce sourcing away from the U.S. to other countries, CEO Bank said during a May analyst call. By September, the retailer had also brought on more than 100 new small Canadian suppliers.
Lindt, which historically sourced about 50 per cent of the chocolates sold in Canadian stores from its U.S. factories and the rest from Europe, said publicly that by the summer of 2025, all of Canada’s supply will come from Europe.
Although counter-tariffs have so far had only a limited impact on the food industry, Graydon said manufacturers that rely on the North American supply chain for ingredients are holding their breath as Canada, the U.S., and Mexico review their trade agreements.
“It’s not easy to change your manufacturing structure and back away from the North American supply chain process and become self-sufficient here in Canada alone,” he said. “Nobody’s making those decisions right now, until we see what happens to free trading.”
Despite the limited impact the tariff war appears to have had on the big three grocers, Canadian consumers continue to feel acutely the impact of high food prices in 2025.
On a Friday morning in September in London, Ont., 37-year-old school board educational assistant Leigh Ann Fearnley was shopping at Food Basics. She said she picked up a pound and a half of ground beef priced at $25. Shocked, she put it back.
“I can’t believe that ground beef is $25,” said Fearnley, a single mom of three children. “I’m gonna have to go to another store and see if I can find ground beef cheaper.”
Fearnley said she spends at least $200 a week on groceries, her biggest cost after rent, and recalls when food was far cheaper — a carton of milk was $4 instead of $6, and cereals cost half of what they do now.
“Sometimes we can’t buy fruits or vegetables because they’re just so expensive. The quality of our nutrition is depleted because nothing is affordable,” Fearnley said.
According to Statistics Canada, Canadians were paying 28 per cent more for food purchased from stores as of August than they were in 2020. Supply chain disruptions during the pandemic, combined with soaring energy prices caused by Russia’s invasion of Ukraine, pushed food inflation to 11.4 per cent in the second half of 2022 — the fastest pace since 1981.
Meanwhile, a 2022 Star investigation found that grocers are raising prices more than necessary, boosting Loblaw’s and Empire’s gross profit margins by 1.1 per cent and 0.7 per cent, respectively, compared with pre-pandemic levels.
There is “an ongoing perception that prices, the inflation, are still high, when in fact it’s the remnants of inflation that we’ve had over three or four or five years,” said Pedro Antunes, chief economist at the Conference Board of Canada, nothing that grocery prices have continued to rise this year, but at a slower pace than in the post-pandemic period.
On Feb. 1, U.S. President Donald Trump carried out his threat to slap 25 per cent tariffs on nearly all Canadian goods and a 10 per cent tariff on Canadian energy products.
In response, Canada announced 25 per cent retaliatory tariffs on $155 billion worth of American goods, including food items on Canadian supermarket shelves such as orange juice, peanut butter, alcohol and coffee, prompting experts to warn that the tariff war would hit consumers hard, sending prices on everything from California-grown tomatoes to U.S.-made shampoo soaring in mere days.
Pedro and other economists interviewed by the Star said that while the counter-tariffs may have contributed to price increases of certain goods, such as fruits and vegetables, earlier in the year, they are unlikely to be the main driver of current retail food inflation, hovering around 3.5 per cent in August.
Economists note that while retaliatory tariffs covered more than 1,800 U.S. products, including nonfood items, that number represented a small share of the thousands on the market, most of which have substitutes.
In recent months, much of the rise in food prices has been driven by meat, especially beef, which has increased by 10 per cent. Massow noted that this was not due to tariffs, but rather feed shortages caused by drought in Western Canada and a reduction in herd sizes.
Taylor Mitchell, an economist at Statistics Canada, said she observed double-digit price increases on certain products targeted by retaliatory tariffs, such as coffee and oranges, but noted that it is difficult to separate the effects of the tariffs from other factors driving prices higher, such as adverse weather and citrus greening.
Cucumbers were subject to the retaliatory tariffs, but thanks to a robust domestic supply, their price has fallen by 28.3 per cent since February, Mitchell said.
University of Calgary economist Trevor Tombe told the Star that while there’s little research on the issue, he estimated that the counter-tariffs would have, at most, a 1 per cent impact on food prices — and only if they were fully passed through to consumers, which is unlikely.
People should not expect food prices to fall back to pre-pandemic levels, since the Bank of Canada imposes a 2 per cent inflation target, said Tombe, adding that wages have, over the past year, risen faster than prices, making life easier for some Canadians.
“What we need to address affordability is not for prices to come down, but for wages and incomes to rise faster than prices,” Tombe said.
