Import costs drive food price inflation in Canada

Recent research issued by the Bank of Canada showed that the accelerated rise in food prices during 2025 was almost entirely due to import costs, not local factors within the Canadian economy.
According to the study published on Tuesday, the annual increase rate in food prices – excluding fruits and vegetables – was 3.1% in 2025, with 2.7 percentage points of this rise resulting from imported food, imported inputs in production, and international shipping costs.
The Bank’s Chief Economist Olga Bielik wrote that imported food prices began rising early in the year, «partly due to the sharp decline in the value of the Canadian dollar in late 2024», which led to increased import costs.

Coffee and Chocolate Leading the Increases

The study particularly highlighted the large jumps in prices of coffee and sweets such as chocolate and candy, where coffee prices rose by 31%, and sweets by 14% by the end of 2025.
Bielik explained that these increases are due to a shortage in global supply, caused by factors including severe weather conditions, along with tariffs imposed on some products.
Earlier, U.S. President Donald Trump had imposed significant tariffs on imports from countries like Brazil, including coffee and meat, before later beginning to roll back some of these tariffs under domestic pressure to reduce living costs.

Intertwined Supply Chains with the United States

The report pointed out that food supply chains between Canada and the United States are closely intertwined, as many Canadian importers rely on American wholesalers and warehouses. Canada also imposed retaliatory tariffs for a period on some American food products, such as coffee and orange juice, which increased price pressures.
The study excluded fruit and vegetable prices from the analysis due to their high volatility linked to frequent weather changes.

Highest Food Inflation in the G7

According to data from Statistics Canada, food prices rose by 6.2% between December 2024 and December 2025, the highest rate among G7 countries. Part of this increase is attributed to the so-called base year effect related to a temporary exemption from the Goods and Services Tax (GST) during last winter.
Nevertheless, Conservative Party leader Pierre Poilievre used these figures to intensify his criticism of the government’s record on affordability, considering food inflation «a problem made inside Canada».

In contrast, Bank of Canada research indicates that global factors are the main driver of these increases.

Government Measures and Unequal Impact on Households

Prime Minister Mark Carney recently announced the expansion of the Goods and Services Tax credit to become what is known as the «Canadian Grocery and Essentials Benefit», in an attempt to mitigate the impact of rising prices on low- and middle-income earners. The Parliamentary Budget Office estimated the program’s cost at about 12.4 billion dollars through 2031.
Official data show that the lowest-income households spend about 27% of their disposable income on food and non-alcoholic beverages, compared to less than 5% for the highest-income households, making them the most affected by food price inflation.
The Bank of Canada confirmed that this study, issued as part of a new research series titled Sparks at Bank, does not reflect the official position of the Bank’s Board of Directors, but aligns with previous warnings from Governor Tiff Macklem that global crop losses and supply disruptions related to weather and trade have contributed to increased inflationary pressures, with some likely to ease in the coming months.