Tariffs and food security, what does it mean?

What’s happening?

President Trump's action on tariffs have shaken global trade. A sweeping 10% baseline on imports, with higher rates for key partners, has sparked chaos.

Financial markets saw their steepest drops since COVID. China hit back with a 34% tariff on U.S. goods whilst the EU and UK are preparing countermeasures. The trade war is escalating fast.

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, dominated by spirits (50%), followed by fish (17%), cereals (6%) and dairy (5%).

Much of this is likely to be made up of products from Scotland. Tariffs could dent export volumes, but demand elasticity is key. If 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.

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. This move highlights the potential widespread impact on trade.

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, identified a growing 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 not only increase prices on both sides but also dampen economic performance. This is particularly concerning as part of a broader global trade conflict. The Chancellor's Spring Statement plans are now under significant pressure.

In the unlikely 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 what 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, 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.

However, 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.  His tariff policies are unlikely to revert to old global trading norms during his presidency.

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. The situation is fluid, and the stakes are high. 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.