Category: Policy & Business

It has been a turbulent month in global trade circles following the US announcements on 2nd April of a swathe of new tariffs being imposed on all its trading partners, with the exception of Canada and Mexico (for most products). This included “universal tariffs” of 10% on most products (excluding key components such as semi-conductors, computer chips etc.), including agricultural goods. Some countries (including the EU (20% tariffs), Japan (24%) and South Africa (30%)) were going to be subject to higher tariffs, which the UK avoided (i.e. UK agricultural exports are subject to the universal tariff only).

Whilst President Trump announced a 90-day pause to the higher tariffs for most countries on 9th April, which has given a temporary reprieve to some, the universal tariffs are in operation. Moreover, for China, a full-scale trade war is now underway with imports of Chinese goods into the US, including agricultural products, now being subject to 145% tariffs. China has retaliated by imposing 125% tariffs on US goods, effective from 12th April and it has suspended imports of key agricultural products like soybeans and pork. In 2022-23, US exports of soybeans to China were estimated at $17.3 billion and from an agri-food perspective, the US exports significantly more to China than what China sends in the opposite direction. (Looking at all goods though China exports much more to the US than trade in the opposite direction).

Trade wars such as this cause significant upheaval on international markets, especially on companies trading directly between the US and China. However, the imposition of tariffs on goods effectively works as a tax on consumption which fuels inflation. Already in the UK, inflation has been trending upwards since the start of the year. The latest estimate (for March 2025) puts inflation (CPI) at 2.6% which is above the Bank of England’s 2% target. Whilst the UK has not imposed reciprocal tariffs on the US any increases in tariffs and associated trade wars are likely to give rise to inflation further down the line.

The 10% tariff will also affect UK exports of agri-food products to the US which we reported last month were estimated at £2.7 billion per annum during 2022-24. Within this, whisky exports are particularly significant and were valued at £971 million in 2024. Back in 2019, the previous Trump Administration imposed a 25% tariff on exports of Scotch whisky to the US, as part of a dispute between the US and the EU, which at the time included the UK as a Member State. Back then, the impact on Scotch whisky sales was significant but the tariffs were suspended when the Biden administration took office in 2021. This time around, there is also likely to be an impact on Scotch whisky sales although other countries (e.g. Japan) will also be affected.

The 10% “Trump tariffs” will also have some effects on exports of other UK products to the US including specialty cheeses. That said, other countries will be facing similar tariff levels and a 10% tariff is within the range of shifts in exchange rates which have been seen on trade from time-to-time. The Trump tariffs have weakened investor confidence in the US and as a result the Dollar has weakened noticeably. Since January, the Dollar has weakened from being worth 82 pence Sterling in January to 75 pence at present – 9% decline. This relative strengthening of Sterling will make UK exports more expensive in the US which will also act as a headwind. Conversely, Sterling has weakened slightly against the Euro (by about 1%) over the same period, which should help the competitiveness of UK exports to the EU, which is a much more important market for UK produce.

Overall, upheaval looks like being a continuing feature of international agri-food trade for the foreseeable future which will cause added challenges for global supply-chains and it looks like globalisation, as we have known it over recent decades, is undergoing a significant reversal.

Defra has announced funding is available via the Farming Innovation Programme (FIP) for those who want to research or develop an innovative solution to a known problem in the agricultural industry.  Readers will recall we wrote about the Programme reopening with funding of £42.5m (see https://abcbooks.co.uk/policy-announcements/).  Already open, and closing on 25th June, is ADOPT – Accelerating Development of Practice and Technologies;

• ADOPT –  support for collaborative farmer-led, on-farm trials or experiments to generate, test and demonstrate innovative solutions to farming challenges. Project outputs will provide knowledge of new approaches which will be shared to the wider sector to provide confidence for others to adopt.

Two further funding competitions will be available from 5th May;

• Precision Breeding – funding for R & D to enable the commercialisation of precision-bred crops in years, rather than decades which will be nutritious, resistant to pests and diseases, resistant to climate change, and beneficial to the environment.
• Low Emmissions – support for innovative ways to reduce emissions on farm.  The examples given include regenerative farming practices, energy efficiency, using organic waste for heat oer electricity generation, and reducing GHG emmissions from livestock production.

There is total funding of £20m for ADOPT and £12.5m for each of the other two competitions, with project costs between £1m -£2.5m available.  Applications must be submitted by 25th June 2025.  Further information on all three funds can be found via https://farminginnovation.ukri.org/

Baroness Minette Batters has been appointed to head Defra’s review into farm profitability.  The review will feed into the 25-Year Farming Roadmap as well as the Land Use Framework and the Food Strategy.  It covers England only.  Baroness Batters will be supported by a team of Defra officials – presumably the new ‘Farm Profitability Unit’ as announced by Steve Reed at the NFU Conference in February.  The review will also be consulting widely with the industry.

The position of Farming Profitability Review Lead is for six months, indicating the final report will be finalised sometime in September or October.  The report aims to make recommendations on policies both the Government and industry could implement to improve farm profitability.  It is highlighted that these must be ‘pragmatic’ and will look at the short, medium, and long term.  It is stated that this is an ‘internal report submitted to the Secretary of State for his review‘ – but presumably the results will be made public.

The full terms of reference can be found here – https://www.gov.uk/government/publications/farming-profitability-review-terms-of-reference/farming-profitability-review-terms-of-reference .  This sets out three main issues for Baroness Batters to consider;

• how farmers can reduce barriers to profitability, increase profit and manage their own risk to improve financial resilience, such as through embracing innovation, improving productivity, increasing market access and using risk management tools
• how the supply chain can support farm profitability such as through greater transparency, cooperation and ensuring a fairer distribution of risks, rewards and responsibilities
• whether there are other ancillary activities that farmers can undertake to support profitability and wider economic growth.

An independent internal review of Defra’s rules and regulations has been published.  The report, which was led by Dan Corry, found that the current system is ‘outdated, inconsistent and complex’.  The review concludes that a ‘bonfire’ of regulations is not the solution, but makes 29 recomendations across 5 strategic themes;

• Focus on outcomes, scale and proportionality; with constrained discretion
• Untangle and tidy ‘green tape’ to ensure process-light and adaptive regulation
• Deploy a fair and consistent ‘thin green line’ on regulatory compliance, with trusted partners earning autonomy
• Unlock the flow of private sector green finance to support nature restoration whilst better targeting public sector finance
• Shift regulators to be more digital, more real-time and more innovative with partners

Defra has responded to the report and will ‘fast-track’ the implementation of nine key recommendations, which it has identified as having the greatest impact for growth and nature recovery, these include;

• a single, lead regulator for major infrastructure projects
• rapidly reviewing the existing catalogue of compliance guidance
• speeding up work to update the Environmental Permitting (England and Wales) Regulations 2016
• convene the environmental regulators to set out the work required to upgrade their digital systems for Planning advice, including a single Planning portal for all agencies.
• a new Defra Infrastructure Board to accelerate the delivery of major infrastructure projects
• more autonomy to allow trusted nature groups to benefit from new freedoms to carry out conservation and restoration work without needing to apply for multiple permissions at every step of a project
• a new industry-funded Nature Market Accelerator to bring coherence to nature markets, boosting investment into natural habitats and driving growth
• clearer guidance and measurable objectives for all Defra’s regulators
• rolling regulatory reform

The review was undertaken in response to concerns that environmental regulation is holding back investment and infrastructure – and thus inhibiting economic growth.  The notorious £100m HS2 ‘bat tunnel’ is often cited as an example.  The full report can be found at https://www.gov.uk/government/publications/delivering-economic-growth-and-nature-recovery-an-independent-review-of-defras-regulatory-landscape/an-independent-review-of-defras-regulatory-landscape-foreword-and-executive-summary

The Welsh Government provided an update on the progress of the Sustainable Farming Scheme (SPS) at the end of March.  In summary, there is little new to report.  The overall scheme design remains the same as set out in November (see https://abcbooks.co.uk/sfs-wales/ ).  The aim is to provide final scheme rules and, presumably, payment rates in the summer.  Likely after the Comprehensive Spending Review provides the budget.  The Welsh Government is continuing to work on the details of the Universal Actions and also a number of the Optional and Collaborative Actions that will be available when the scheme starts in 2026.  An evidence base with an economic analysis and impact assessment is also being worked on.  The full statement can be found at https://www.gov.wales/written-statement-sustainable-farming-scheme-sfs-scheme-design-update .