Since returning to office in January 2025, President Donald Trump has reignited his signature ‘America First’ trade agenda. This has escalated tensions with its major trading partners, including China, Canada and Mexico with concerns that the European Union will be next. There are also suggestions that the UK will get caught up in these disputes.
On 4th March, the US imposed a series of tariffs on imports from China. Across goods generally, the US imports more from China than it exports in the opposite direction. However, within agriculture, the opposite is the case and exports of soybeans in particular to China are substantial. Meat exports from the US to China, including pork, poultry and beef are also sizeable. These sectors will now be hit with Chinese tariffs, ranging from 10-15%. It is anticipated that China will source more produce from elsewhere, particularly Latin America. This is what happened when the previous Trump administration imposed tariffs on China.
The US has also announced plans to put 25% tariffs on imports from Canada and Mexico; although these have been suspended until 2nd April if the goods are covered under the USMCA trade deal. Most agricultural goods are covered with the exception of dairy exports from Canada to the US. On 4th March, Canada announced that it was retaliating by imposing 25% tariffs on CA$30 billion worth of imports from the US, and that an additional CA$150 billion of imports from the US would also face similar tariffs by end March. Both the US and Canada have since been in discussions to resolve the trade disputes, but businesses remain cautious given the recent volatility in US trade policy.
In addition, the Trump administration has stated that the EU is on its hitlist for tariffs and on 4th March President Trump stated that ‘reciprocal’ tariffs would be imposed on 2nd April on countries that he believes are treating the US unfairly. Tariffs on steel imports into the US have already been imposed and the EU is preparing a list of products that it plans to hit the US with tariffs from early April. This will include products such as bourbon but other agricultural products such as beef, poultry meat, dairy products, sugar and vegetables will also be targeted.
The US stance on the UK appears to be softer and the President has even floated the idea of a trade deal with the UK. That said, the US administration also implied last month that reviewing the one-month suspension of tariffs on Canada and Mexico was not a priority, but then changed its stance completely. This illustrates the unpredictability of US trade policy and similar could happen with the UK. In 2023 alone, the UK exported nearly £980m worth of whisky to the US and during the 2022-24 period exported on average £2.7 billion worth of agri-food goods to the US. In addition to whisky, the UK has also carved out lucrative niches for products such as specialty cheeses. On its part, the US only exports about £1.8 billion worth of agri-food goods into the UK and as part of any trade deal, it would be keen to increase that figure by exporting more beef for instance.
Although the US has made overtures about a trade deal, the prospects of an agreement appear some way off. The Labour Government is more focused on re-setting its relationship with the EU. The Government will need to strike a delicate balance between any closening of the relationship with the EU whilst not attracting unwanted attention from the US in terms of tariff actions. That said, a longer term trade deal with the US cannot be ruled out, especially if there were to be a change in Government at the next general election.
More generally, trade wars unsettle commodities and financial markets whilst also creating upheaval for supply-chains in addition to being inflationary. With UK inflation rising again, and projected to reach 3.7% in late 2025 (significantly above the Bank of England’s 2% target) the effects of a global trade war adds to economic uncertainty.