With the White House's upcoming "reciprocal tariffs" set to impact 15 percent of its trading partners, the U.S. hospitality industry, which relies heavily on foreign-sourced materials, is bracing for significant cost increases and squeezed profit margins.
U.S. President Donald Trump has vowed to announce sweeping tariffs against trading partners and end a temporary reprieve on levies tied to some goods from Mexico and Canada on April 2. As the deadline draws near, many businesses are on edge.
Among those grappling with the uncertainty is Stathis Antonakopoulos, CEO of Carnegie Hospitality, who is pressing ahead with his fifth restaurant opening in six years under the 'Carnegie Dinner and Cafe' banner. Although construction is halfway done, he admits the new tariffs on building materials might eat into his margins.
"We believe it's going to increase the price. But in reality, this is unchartered water. We don't know what is going to happen until it actually happens. Because right now a lot of materials are still in stock in USA with the prior pricing. So, we understand the tariffs and the political part of it. But then the business has to learn to adapt and adjust," said Antonakopoulos.
The experienced restaurateur acknowledges that his newest endeavor is likely to go over budget, even as he works overtime to find alternative materials to reduce or avoid levies. Previously, his company relied on high-quality Chinese tiles, which may no longer be a viable option.
"In the past, we have used Chinese tiles. That was amazing quality and superb looks," he said.
Beyond construction costs, the National Restaurant Association warns that a 25 percent tariff on food and beverage imports from Mexico and Canada could cut into restaurant profits by up to 30 percent.
In a letter to the White House, the association estimated potential losses for American restaurants at over 12 billion dollars, urging the Trump administration to "exempt food and beverage products to minimize the impact on restaurant owners and consumers."
Hospitality executive Andrew Rigie shared similar sentiments.
"It costs a lot of money to operate a small restaurant and so many of them are already struggling. And now when you're talking about potentially adding tariffs to a huge number of the items that they're purchasing, it is going to make it even more expensive. For restaurants too, they want to remain as affordable as possible when all these costs are going up because they don't want to scare their customers away," said Rigie, Executive Director of the New York City Hospitality Alliance.
As the industry awaits the final decision, businesses are facing a difficult choice between absorbing higher costs and risking customer loss.
US hospitality industry braces for rising costs amid looming tariffs
US hospitality industry braces for rising costs amid looming tariffs
