How could Trump's Tariffs impact UK Farming Businesses?

At the time of writing the Trump administration has just outlined tariffs to the World. The UK has had a 10% tariff imposed, whilst the EU has had a 20% tariff imposed on them.

In recent times these tariffs have been used as a negotiating tool for border security. Generally, these tariffs have been introduced to protect US domestic industries, reduce their trade deficit, and retaliate against other countries’ foreign policies.

For UK agriculture, the US is a key trading partner and the third largest export market. The Prime Minister has recently returned from the US with discussions on the table on a potential free trade deal.

Whilst on the surface free trade sounds fantastic, it is unlikely that this would be a wide-reaching agreement, and it will instead focus on specific sectors like technology and human sciences. The scary thought for agriculture is that a deal for the above sectors could come at the expense of agriculture, if for example, chlorinated chicken was made legal and allowed into the UK as a result.

If the US was to impose tariffs on agricultural imports to the US, this would have serious consequences for British farmers.

If tariffs are imposed British exports would become more expensive compared to US domestic products.

This could have the result of reducing demand from the UK, as US consumers no longer want the product or have the impact of forcing UK producers to absorb the cost. The likely impact of the latter would be a reduction in farmgate prices.

If demand reduces, there will likely be surplus supply which again could flood the UK domestic market and result in farmgate prices again reducing.

The impact could vary depending on the sector. For example, high end cheese may not see a change in demand and this additional cost may be absorbed by the US consumer, whereas lamb or other meat products may see the above.

Tariffs around the world could cause farming businesses could see some of the following impacts:

1. Supply chain disruptions

Tariffs often cause disruption of key goods like steel. This would cause issues to businesses completing projects and/or expanding like we saw during the covid lockdown periods.

2. Negative currency and inflations effects

Trade barriers could weaken the pound against the dollar. This would have the impact of making imports more expensive as most are completed in dollars. This would drive inflation in the UK and likely cause interest rates to remain higher for longer.

This would likely put squeezes on cashflow and reduce farm profitability.

Overall, the impact of tariffs either directly or indirectly will be negative on the overall economy and, both short and long term, this will hurt UK farming. It is key in this turbulent time you continue to review your exposure to risk and explore how to mitigate it. We need to try and build resilience in our businesses to weather the impact of these changes.