New Tariffs Are Here- Here's How Your Baking Business Should BRACE FOR IMPACT!

As bakery owners, we're no strangers to challenges—whether vanilla is skyrocketing, we’re forced to pivot for a pandemic, or figure out how to navigate the recent egg crisis, small business owners (especially in the FOOD/BAKING industry) have been forced to learn the art of flexibility in order to stay in business.

However, the latest round of tariffs will significantly impact our bottom line. And with most small bakeries already operating on razor-thin profit margins, WE stand to take on the bulk of the burden.

Here’s why:

In 2024, U.S. bakers imported:

• $977 million in goods from Canada (including $193 million in ingredients, $31 million in packaging, and $15 million in equipment).
  
  
• $679 million in goods from Mexico (including $96 million in ingredients, $17 million in packaging, and $56 million in equipment).
  
  
• $395 million from China (including $13 million in ingredients, $15 million in packaging, and $11 million in equipment).
  
  

The American Bakers Association (ABA) found that tariffs of 25% on Canadian and Mexican goods, and 10% on Chinese goods, would increase costs dramatically:

• Canadian imports: $244 million increase
  
  
• Mexican imports: $170 million increase
  
  
• Chinese imports: $40 million increase
  
  

How Does This Affect Your Bakery?

Most small bakeries operate with very tight margins—typically between 5% and 10% because they start out UNDERPRICED. (Let’s just say, PRICING and PROFITABILITY is not our strong suit.) But are bakery owners even paying attention to their bottom line to notice a sudden cost increase of 25-35% on key ingredients and supplies? In my experience, NO.

Why is this? It’s because most bakery owners start businesses from hobbies, which often results in romanticizing fun things like, cake decorating or recipe development. Which results in low profits, very little cash flow, and overwhelming frustration. Does this sound familiar? Well friends, at the risk of underpricing your way completely OUT OF BUSINESS, we’ve gotta get really good as an industry at not only correctly calculating costs, but also factoring in a reasonable PROFIT. (I have so many FREE resources available to help you with pricing, so click here if you need some tips!) In the meantime…

Here Are 3 Ways to Brace for Impact:

1. Review and Adjust Your Pricing NOW

Now is the time to carefully assess your costs and strategically adjust your prices. Do you even know what your cakes COST to make? Do you know what your monthly or yearly operating expenses are? (If not, now’s the time to figure it out!) 

You’ll need to clearly communicate with your customers about the reasons for these price changes—transparency helps build customer loyalty and understanding. (If you haven’t mastered AI yet, I have an amazing training for Bakers to learn how to leverage AI to MASTER their PRICING, branding, and social media! It’s a GAME CHANGER, and you can access it here!)

2. Source Alternatives Locally

Although there are very few American alternatives to a lot of the cheap and easily accessible packaging, decorating supplies, and equipment we often use on a daily basis, NOW is the time to explore local or alternative sources. There will be MANY business owners shopping for local alternatives for ingredients and packaging to reduce dependency on tariff-affected imports, and while it may be inconvenient and initially challenging, local sourcing can become a long-term strategic advantage, potentially appealing to customers who value supporting local businesses. (But, with an increased demand for local alternatives, the price for those products is likely to increase too.)

3. Move QUICKLY to Increase Operational Efficiency

Evaluate your operational processes and procedures to identify cost-saving inefficiencies and opportunities. Implement lean practices, streamline production, and minimize waste. Even the smallest inefficiencies can help offset impending increased costs. So scrub your books and your processes! (Again, I have so many ways to leverage AI for increased productivity and efficiency, so be sure to snag this AI training to start saving time and money now!)

Final Thoughts

These tariffs present real challenges to our small businesses, but proactive planning can help your bakery weather the storm. Stay informed, stay strategic, and most importantly, stay connected with my baking community for tips and tools to weather this storm. Together, we can navigate these changes and keep our businesses thriving, instead of struggling to simply survive.