What’s happening?

The international trade situation continues to change, quickly. President Trump has announced major changes to the tariff regime introduced only a few days ago.

The new regime initially set a 10% universal tariff affecting the UK, with higher rates for goods from countries or blocs seen as being “problematic” (affecting the EU).

Most of the higher rates have been reduced to the baseline 10% rate in order to allow for further talks. The majority of goods from the EU now face 10% tariffs on entry to the USA, but this will last only 90 days.

It is not clear what will happen after that, or what talks with the EU would have to achieve, from the US viewpoint, to prevent higher rates being imposed later.

China has been targeted by even higher tariffs, however – tariffs for Chinese goods have now reached 125%. Both China and the US are striking a very tough stance on trade.

UK food and drink exposure

The UK’s food and drink trade with the US is limited, accounting for about 2% of UK imports and about 10% of exports.

Exports to the US are worth about £75m per year, mostly spirits (50%), followed by fish (17%), cereals (6%) and dairy (5%). Much of this is made up of products from Scotland.

Tariffs could dent export volumes, but demand elasticity is key. If higher prices don’t deter buyers, trade may hold steady.

Otherwise, these goods could find new markets, reshaping global trade flows - it’s a delicate balance, with many variables. Right now, outcomes are very hard to predict.

The UK response

The UK government has drawn up a list of US products which may be subject to retaliatory 10% tariffs.

However, the UK is being  selective, targeting about a quarter of US imports – over 24,000 goods. Many American goods are omitted, for now. The ideal outcome, of course, is for the UK to avoid imposing tariffs entirely and, in reality, the UK has limited trade leverage against the US.

For now, the list is only a proposal and interested parties can respond by 1 May 2025. The current longlist is organised by commodity code.

Pressure on the Chancellor

The latest report from the OBR, warned of an expanding trade war as the biggest threat to its growth forecasts and therefore to the Chancellor’s fiscal plans.

Reciprocal tariffs between the US and UK would increase prices on both sides and dampen economic performance. This is particularly concerning as part of a broader global trade conflict. The Chancellor's Spring Statement plans are already under significant pressure.

In the scenario that US tariff policies extend to services, the economic fallout would deepen further, amplifying the strain on growth and fiscal strategies. The situation is evolving rapidly, and the stakes are high.

Impacts on resilience

Short-term tariff impacts are predictable – rising inflation, higher interest rates, weak economic growth and currency volatility.

However, the hidden long-term effects might be far graver with impacts on food security and the UK’s resilience.

UK food businesses rely on intricate global supply chains to keep costs low and ensure food security, as the UK produces only about 60% of the food it consumes. Disruptions to trade could jeopardise these benefits, leading to higher prices and vulnerabilities in food supply.

IGD’s report, Building a Resilient Food System, highlights these risks and emphasizes the need for strategies to strengthen resilience in the face of geopolitical and economic challenges.

The UK’s proposed tariff list includes numerous food items from the U.S, but many of these could be sourced elsewhere. The greater concern lies in inputs crucial to the food system. 

Key items like liquid natural gas and veterinary supplies have been spared for now—both vital for energy and production processes.

Other inputs have been targeted. Fertilisers and other agri-chemicals are included, though the U.S. only accounts for a small part of UK imports.

More pressing are technical and engineering goods – spare parts for farm equipment, industrial robots and computers. These are an essential part of an advanced food system.

Higher tariffs could deter investment, potentially slowing the evolution toward greater resilience in the UK’s food infrastructure. The ripple effects could be profound.

What’s next?

In his first Presidency, Mr Trump stood firm on tariffs. This time around, his policy seems more flexible and reactive, although it is hard to discern any broad plan or detailed doctrine at work. 

Any widespread tariff action by governments could disrupt established trade flows, forging new alliances and patterns.  The ripple effects on the global economy could be profound, reshaping industries and markets. We will provide updates as this unfolds.

Geopolitics is one of the leading risks that we identified in our latest report Building a resilient food system exploring the greatest risks to the UK food system.

In a world increasingly affected by climate change, conflict and other forces it is essential the UK food system prioritises resilience to secure our food supply.