If you’re a restaurateur in Toronto, you’re likely wondering how the recent U.S. tariffs might affect your business. With trade tensions escalating between Canada and the United States, understanding the potential impacts on your restaurant or commercial property is crucial for making informed decisions in the months ahead.
Understanding the Current Tariff Situation
The recent implementation of 25% tariffs on goods imported into the U.S. from Canada has created ripples across various industries. As of March 2025, these measures have triggered retaliatory actions from the Canadian government, which will potentially impose equivalent tariffs on up to $125 billion worth of American goods.
Restaurants Canada has already issued a statement expressing concern about how these measures will affect the foodservice industry, warning of potential job losses and increased operational costs that could severely impact already thin profit margins. The organization has called for government support measures to help businesses navigate these challenging times.
Supply Chain Disruptions for Toronto Restaurants
One of the most immediate impacts you’ll likely notice is disruption to your supply chain. Many Toronto restaurants source ingredients, beverages, and equipment from the U.S., and these imports are now subject to higher costs.
Rising Food and Beverage Costs
Specialty ingredients sourced from the U.S. will become more expensive. For example, if your restaurant menu features dishes with American cheeses, wines, or specific produce varieties, you can expect price increases from your suppliers. Some Toronto restaurants are already reporting cost increases of up to 25% on certain imported items.
Alcoholic beverages are particularly vulnerable. American whiskeys, craft beers, and wines that have become staples in Toronto’s dining scene may see significant price hikes. Craft breweries utilizing American canning services have already faced production expense increases, which are being passed down to restaurants and bars throughout the city.
Equipment and Maintenance Challenges
It’s not just food and beverages that will be affected. Restaurant equipment—from specialized kitchen appliances to tableware—often comes from U.S. manufacturers. When it’s time to replace or upgrade your equipment, you may face substantially higher costs or delayed deliveries as suppliers work through the new tariff landscape.
Maintenance parts for existing equipment could also become more expensive and harder to source, potentially extending downtime when repairs are needed—a critical concern for busy restaurants where every operational hour counts.
Real Estate Implications for Restaurant Properties
The tariffs will have significant implications for the commercial real estate sector, particularly for those looking to open new restaurants or renovate existing spaces in Toronto.
Construction Cost Increases
If you’re planning to build out a new restaurant space or renovate your existing location, be prepared for higher costs. Construction materials like steel, lumber, and fixtures often cross the border before reaching Toronto projects. The tariffs have already begun to drive up these costs, with some developers reporting budget increases of 15-20% for new builds.
With the new tariffs, these costs could climb higher, potentially delaying projects or forcing scaled-back designs to meet budget constraints.
Impact on Commercial Lease Rates
In Toronto’s competitive real estate market, landlords are likely to pass increased maintenance and construction costs onto tenants. This could manifest through higher base rents or increased common area maintenance (CAM) charges in triple-net lease structures, which are common in the restaurant industry.
For restaurant owners currently negotiating new leases, this changing landscape warrants careful consideration of escalation clauses and perhaps pushing for caps on annual increases to protect against unexpected jumps in occupancy costs.
Shifting Consumer Behaviour and Business Strategy
Beyond direct cost impacts, the tariffs are influencing how Toronto diners make decisions, creating both challenges and opportunities for restaurant owners.
The “Buy Local” Movement Gains Momentum
There’s evidence of a growing “buy local” sentiment among Toronto consumers in response to the trade tensions. Some restaurants have publicly announced boycotts of American products, finding alternatives from Canadian suppliers instead. For example, a Junction Triangle pizzeria recently made headlines by eliminating all U.S.-sourced products from its menu, garnering significant community support.
This shift presents an opportunity to rebrand your menu to emphasize Canadian-sourced ingredients. Highlighting local partnerships can resonate with customers who are increasingly making patriotic purchasing decisions, even if they come with slightly higher price points.
Menu Engineering to Mitigate Cost Increases
Smart menu engineering will become even more important as certain ingredients become more expensive. Consider these strategies:
- Reduce portion sizes slightly on dishes with tariff-affected ingredients
- Create new signature dishes featuring locally-sourced alternatives
- Implement dynamic pricing for items most affected by supply chain volatility
- Add optional premium add-ons rather than raising base prices across the board
The National Restaurant Association in the U.S. has estimated that tariffs could result in a $12 billion hit to restaurants nationwide. While Canadian establishments won’t face identical impacts, the interconnectedness of our supply chains means similar challenges for margin management.
Investment Considerations in Toronto’s Restaurant Real Estate
If you’re considering buying or selling a restaurant property in Toronto during this period of uncertainty, several factors warrant close attention.
Property Valuation Shifts
Interestingly, the tariffs might actually benefit owners of existing restaurant properties in some ways. As construction costs rise for new builds, the replacement value of existing, well-maintained restaurant spaces increases. This can make established locations more attractive to buyers who want to avoid the uncertainties of new construction in the current climate.
According to commercial real estate analysts, properties with recently completed renovations or updated systems may command premium prices as buyers seek to avoid the inflated costs and potential delays of doing those improvements themselves.
As noted in our previous analysis of restaurant investments, technology integration and energy efficiency upgrades now carry even greater weight in property valuations as operating costs rise.
Financing Challenges and Opportunities
Lenders are becoming more cautious about extending credit for restaurant ventures given the uncertain ROI projections under the current economic climate. If you’re seeking financing for a restaurant purchase or renovation, expect more stringent requirements and potentially higher interest rates to offset perceived risks.
However, this tightening of conventional financing has also spurred creative investment structures, including increased investor partnerships, vendor take-back mortgages, and earn-out agreements that distribute risk more evenly between buyers and sellers. Working with a specialized restaurant broker who understands these emerging models can help navigate the changing financial landscape.
Regional Impact: GTA’s Industrial Real Estate and Supply Chain
The tariffs’ effects extend beyond restaurant spaces themselves to impact the broader commercial real estate ecosystem, particularly industrial spaces that support the restaurant industry.
Warehouse and Distribution Adaptations
Some food service companies are rethinking their supply chain strategies, potentially requiring more warehouse space in the GTA to maintain larger inventory buffers against border disruptions. Others are diversifying supplier networks to include more Asian or European sources, necessitating expanded logistics capabilities to accommodate the longer lead times inherent in transoceanic shipping routes.
This recalibration could create opportunities for property owners with suitable industrial spaces near Toronto’s restaurant hubs. Facilities that can accommodate food-grade storage with appropriate refrigeration and handling capabilities may see increased demand as restaurants and suppliers adjust their inventory management approaches.
Long-term Location Strategy Shifts
The tariff situation is causing some restaurant groups to reconsider their location strategies within the GTA. Areas with better access to local supply chains, particularly for fresh produce and proteins, may become more attractive for new openings. Locations near food terminals or with strong eco-friendly infrastructure could see increased interest as operators look to minimize cross-border dependencies.
Areas with high concentrations of food processing businesses that previously relied on export markets might face challenges as some companies relocate production southward to avoid tariffs when selling to American customers. This could potentially create vacancies in certain industrial corridors but also opportunities for adaptive reuse of these spaces.
Practical Steps for Restaurant Owners and Investors
So what can you do right now to navigate this changing landscape? Here are some actionable strategies:
Immediate Operational Adjustments
Start by conducting a thorough audit of your supply chain to identify vulnerable areas. Which of your ingredients, beverages, or operational supplies come from U.S. sources? For each impacted item, develop a contingency plan:
- Identify alternative Canadian suppliers where possible
- Negotiate longer-term contracts with existing suppliers to lock in pre-increase prices
- Consider bulk purchasing and enhanced storage for non-perishable items expected to increase in price
- Explore pre-payment options with trusted vendors to secure current pricing
You should also review your menu pricing strategy. Rather than implementing across-the-board increases that might alienate customers, consider selective adjustments on the most affected items, possibly coupled with portion adjustments or ingredient substitutions where appropriate.
Real Estate Decision Making
If you’re currently in lease negotiations or considering property acquisition, the tariff situation adds new factors to consider:
- For new leases, push for grace periods on CAM increases related to tariff-induced maintenance cost spikes
- Consider shorter initial terms with multiple renewal options to maintain flexibility
- Evaluate the existing kitchen equipment and infrastructure carefully—replacing or upgrading these may be significantly more expensive in the current climate
- For property purchases, factor in higher future replacement costs for building systems and equipment when calculating offers
Maximizing restaurant success through strategic real estate decisions has always been important, but the stakes are even higher in this volatile environment.
Industry Advocacy and Support Resources
The restaurant industry isn’t facing these challenges alone. Various organizations are working to mitigate the impacts of tariffs on foodservice businesses:
Industry Association Initiatives
Restaurants Canada is actively lobbying policymakers to exempt perishable foodstuffs and agricultural inputs from the retaliatory tariff schedules. Success in these efforts would prevent unnecessary inflationary spirals for essential items already straining operational budgets.
The organization is also advocating for support programs similar to the pandemic-era wage subsidies to help businesses maintain employment levels during this period of adjustment. Staying connected with these industry bodies can help you stay informed about potential relief measures.
Financial Risk Management Tools
With currency fluctuations adding another layer of uncertainty, some restaurant groups are exploring hedging mechanisms to lock in favorable exchange rates for future purchases. While such financial instruments typically require significant scale to be cost-effective, group purchasing organizations are emerging to help smaller operators access these tools collectively.
Working with specialist restaurant brokers who understand these financial complexities can provide valuable guidance on protecting your business from both tariff and currency-related volatility.
Looking Ahead: Long-term Industry Evolution
While the immediate focus is on navigating the current challenges, the tariff situation is likely to accelerate several long-term trends in Toronto’s restaurant industry:
Supply Chain Localization
Expect to see more investment in local food production capabilities, from urban agriculture to regional processing facilities. Restaurants that forge direct partnerships with Ontario farmers and producers now may gain competitive advantages in terms of both supply security and marketing appeal.
Food halls and collective purchasing groups may gain popularity as smaller operators seek economies of scale to offset rising costs. These collaborative models can help individual restaurants maintain viable operations despite supply chain pressures.
Real Estate Market Segmentation
The commercial real estate market for restaurants may become increasingly segmented. Premium locations with established infrastructure and good transportation connections to local supply chains could command even higher premiums, while less optimally positioned properties might require significant concessions to attract tenants.
Second-generation restaurant spaces (those previously operated as restaurants) will likely see increased demand as operators seek to avoid the tariff-impacted costs of building out new locations from raw space. This could create opportunities for property owners to reposition existing assets specifically for the food service market.
Conclusion: Resilience Through Adaptation
Toronto’s restaurant industry has proven remarkably resilient through previous challenges, from economic downturns to the recent pandemic. The current tariff situation presents another hurdle, but also opportunities for forward-thinking operators and investors.
By taking a proactive approach to supply chain management, strategic menu development, and real estate decisions, you can position your business to weather the immediate impacts while building longer-term competitive advantages.
The restaurants most likely to thrive will be those that embrace localization trends, optimize operational efficiencies, and diversify revenue streams. While we can’t control the geopolitical forces driving trade policy, we can control how we respond to them—with creativity, flexibility, and a commitment to the exceptional dining experiences that have made Toronto’s restaurant scene world-renowned.