A victory for Donald Trump in the US presidential election is likely to have ramifications for everyone on the planet, given the country’s ability to shape global events and his stated America-first approach.
The surprisingly large margin of Trump’s victory, and the corresponding wins for the Republican Party in both houses of Congress, will presumably embolden a leader who has never been shy in promoting radical policies to claim a mandate for economic policies that he believes will boost US industry.
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As far as global food and beverage manufacturers exporting to the US are concerned, the fear is potential tariffs and a US approach that might be categorised as protectionist.
Import tax hike?
Trump, who also dislikes international trade deals and may seek to renegotiate those or pull the US out of them, has talked about hiking import taxes to protect, and give an advantage to, domestic providers.
Last month, speaking to news agency Bloomberg, Trump said: “To me, the most beautiful word in the dictionary is ‘tariffs’. It’s my favourite word.”
He proposed at least a 10% blanket tariff on all imports, with import taxes as high as 60% on goods from China.
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By GlobalDataRace to the bottom
The question is, to what degree realpolitik will come into play?
Many economists and market-watchers suggest such an approach, which could see a tit-for-tat reaction on US exports, is a race to the bottom and could actually result in higher prices for US consumers.
One must assume that, as big and self-sufficient as the US is, American consumers will still want to have foreign food and drink as part of their diet, so then the question becomes one about how big the import tax burden becomes on non-domestic providers and whether they will try and pass on some of those costs to US consumers.
The US is such a large market that it is unlikely increased tariffs will see large foreign exporters walk away, but small-and medium-size enterprises (SMEs) may think twice about targeting American consumers.
Fear and hope
All this is conjecture, of course, and it should be remembered that following his election in 2016, the then President Trump did not implement all of the measures he had talked about in the run up to polling day.
Sector analysts and industry bodies on the other side of the Atlantic, responding soon after Trump’s victory became apparent, seem to be fearing the worst, while hoping for the best.
Clive Black, a director at UK investment company Shore Capital, said: “Whether the UK food sector is at the forefront of attention is doubtful over exports from, say, China, Brazil and India, maybe France too, but the waves from tariffs can lap in strange ways.
“It feels less likely that a trade deal will emerge between the UK and the US with a Labour government in Westminster, food standards being a key sticking point, but British food businesses may be keeping an eye on how US-EU relations evolve and any backwashes around trade flows plus the UK government’s interactions with the EU versus the US.
“The big impact may, however, for all of us, be how the Trump government impacts global trade, geopolitics, and so stability or otherwise that is clearly manifested in economic terms in currency movements, commodity and energy prices (remember the initial impact of the Ukraine War), and the movement of people. Things are likely to change, but how, well who knows?”
Other options on table?
Cyrille Filott, global strategist for consumer foods, packaging and logistics at Rabobank in the Netherlands, said: “Trump will try and protect American workers and farmers from unfair trade, prioritising domestic production and ensuring national independence in essential goods and services.
“This means support for farmers and potentially trade barriers for certain products. Exporters to the US should take note, however the shape and form of the trade barriers or tariffs is unclear. It could be a universal 10%-20% rate, but other options might be on the table as well. We believe there might be room to negotiate for some products or countries.
“We are not aware of any countermeasures against the tariffs yet, but we are not ruling these out either.”
Rod Addy, director general of UK trade body, the Provision Trade Federation, said: “There’s little doubt that a Trump victory spells greater volatility and uncertainty on the world stage and would likely trigger an increase in the cost of international trade. There are already indications that [UK Prime Minister] Keir Starmer may be tempted to forge even closer ties with the EU to offset this.
“A Trump administration looks set to damage international progress on net zero and his tougher stance on NATO will weaken Europe’s position relative to Russia.
“In short, expect more turbulent times ahead.”
On the drinks front, Kevin Baker, head of global beer and cider research at GlobalData – the parent company of Just Drinks and Just Food – said: “Protectionism may see increased tariffs on imported beers, and the MAGA [make America great again] rhetoric may also see a resurgence in the popularity of ‘all American’ beers”.
Pauline Bastidon, director of trade and economic affairs at the trade association SpiritsEurope, added: “Regardless of the outcome of the US presidential election, our mutual commitment to a tariff-free transatlantic spirits market remains essential, reflecting the unique interconnections and shared goals between our regions.
“We look forward to working with the new US administration and the European Commission to advance a positive transatlantic agenda that benefits our industry on both sides of the Atlantic.”
Clear concerns
And Miles Beale, chief executive of the UK’s Wine and Spirit Trade Association, said: “There are some clear concerns inherited from President Trump’s first term, such as increased tariffs on wine and spirit products, and the sector becoming collateral damage in non-industry related trade disputes once again.
“On the other hand, there is the opportunity of a US-UK free trade agreement. What is certain is that the WSTA remains committed to working with officials, drinks trade associations, companies and other stakeholders on both sides of the Atlantic to advance the cause of the UK wine and spirit industry.”
As far as the US domestic food and beverage sector is concerned, as our American correspondent Victor Martino wrote recently, we can expect to see a discontinuation of the Biden Administration’s plans to introduce a federal law on ‘price gouging’ by big food companies, with Trump suggesting his economic policies will bring prices down.
Fewer regulations
He is also not a great believer in climate change so previous administration initiatives on agri-food sustainability are unlikely to be progressed.
Trump argues regulations in this area are overly restrictive and detrimental to farmers’ livelihoods, particularly small- and medium-sized family farms.
His focus is on increasing agricultural productivity and expanding economic opportunities without necessarily tying these goals to environmental sustainability.
However, a push on consumer health is not out of the question. As Filott at Rabobank says: “If Robert F Kennedy Jr. gets a role in the administration, we might see a big push towards organic food and reduction in the use of non-biological farm inputs. RFK also is talking about a reduction in the use oil seeds and the consumption of ultra-processed foods.”
Meanwhile, labour rights in the sector, linked to higher salaries and safer working conditions, are also unlikely to be high on the Trump agenda while tougher immigration policies could have direct implications for the agricultural sector and meatpackers.
All in all, we will be living through interesting times.
