Bulletin: New tariffs announced

The Spring Statement – what to expect?

The Chancellor faces a tough balancing act with her first Spring Statement on 26 March. Possible changes include:

• spending cuts targeting the largest expenditure areas, including social security

• reforming out-of-work benefits and encouraging inactive individuals to re-enter the workforce

• freezing income tax thresholds, pushing more workers into higher tax bands.

Read the article by James Walton, our Chief Economist.

Steel and aluminium tariffs

The US has confirmed that a flat 25% tariff will be applied to all imports of steel and aluminium, including those from the UK and EU.

The EU has announced plans for counter-tariffs on a range of US products, but the UK has not yet responded officially.

The US President recently announced the start of talks with the UK on a “new economic deal”, which is expected to focus on technology.

Threats to levy even higher tariffs on goods from Canada have been withdrawn, for the moment, after Ontario proposed special surcharges on energy exports to the US.

The introduction of tariffs hampers economic performance for all parties involved. Geopolitics ranks highly as one of the leading risks facing the food system, identified in our report Embracing resilience in the UK food system” due to be published next week.

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IGD Opinion
The US continues to pursue its new “America First” approach in both trade and defence policy.

Events are moving fast, and the strategic landscape is changing before our eyes, with the US moving away from established allies such as the UK and EU.

The effect of this can be seen in the UK’s decision to reduce foreign aid in favour of defence, and we may also see the impact in the Spring Statement.

These changes may also add fresh urgency to attempts to review relations between the UK and the EU. The EU’s proposed counter-measures will include a range of agri-food products.

If these go ahead, we may expect some inflationary impact for food shoppers in Europe.

We await a response from the UK government but, even if there is none, the UK economy will still be affected to a general damping-down of global trade.

See our article US tariff policy impacts on the UK food system.

GDP

New ONS data shows that the UK economy shrank by 0.1% month-on-month in “real terms” in January, mainly due to contraction of the Production sector (especially manufacturing). The UK population is in growth so, in per-capita terms, performance was even weaker.

IGD opinion

Monthly GDP data tends to be very volatile – quarterly data may give a more reliable view of the economic situation. This data is also provisional, based upon a limited set of inputs – the revised version may offer better news, but it seems that 2025 got off to a shaky start.

The most recent OBR forecast, from October 2024, suggested that the economy would grow by about 2.0% in 2025 and a weak start would make it difficult to hit this mark.

The strategic situation has changed significantly since October 2024, with big geo-political shifts and a downturn in UK business confidence. The next OBR report, to be issued on 26 March, will include a revised GDP forecast. IGD anticipates that this will be more pessimistic.

 Living standards decline

A report by the National Institute of Economic and Social Research has revealed that:

• The poorest households in the UK are now poorer than the poorest parts of countries like Slovenia and Malta.

• Real incomes in the majority of European regions have grown at a faster rate than those in UK.

• Weak productivity is costing UK workers £4,300 per year.

Sustainable farming incentives

With the sustainable farming budget allocated, the government has announced that it will stop accepting new applications for the Sustainable Farming Incentive (SFI). All existing SFI agreements and outstanding eligible applications that have been submitted will be processed.

The government has said that it will provide further details about the reformed SFI offer with details to follow the Spending Review. The National Farmers Union has criticised the move.