Since the inauguration of President Trump on 20th January, there have been a major shift in US trade policy back towards protectionism. Whilst this has not directly affected UK agriculture yet, it has caused significant upheaval, particularly in the likes of Canada and Mexico. These countries narrowly avoided a trade war and the imposition of 25% tariffs on all exports to the US. The imposition of tariffs have been suspended for a month, although US officials have suggested that the tariff threat was intended as leverage in ongoing trade talks, rather than a permanent policy shift. There is also a universal 25% tariff on steel imports and a 10% tariff on aluminium. These announcements have created significant volatility in commodity prices and exchange rates which, in turn, have contributed to greater market uncertainty, including for agricultural commodities.
There are some indications that the EU is next on the Trump administration’s hit-list as it views several aspects of EU trade policy, including sanitary and phytosanitary (SPS) regulations as being unfair to the US. It remains to be seen how this will play out as the Trump administration is also using the threat of tariffs to gain concessions elsewhere (e.g. border control and security) as it has done with Canada and Mexico. Of course, with the UK being outside of the EU, it would not be directly affected by such moves. That said, a bilateral trade spat between the UK and the US cannot be ruled out although the British Government is doing its best to stay on the right side of Trump on most issues.
Therefore, whilst the new US administration has brought greater uncertainty to commodities markets and threats of tariffs being imposed at short notice, the effects on British agriculture have thus far been relatively low. Longer term, the possibility of a US-UK free trade agreement cannot be completely ruled out, although any deal would have to offer significant advantages to the US. Such a deal would likely signify increased competition for products such as beef and pork although there could be some opportunities for British lamb and some dairy products.
The world has entered a period of significant upheaval, not just in terms of trade policy, but politically as well. Navigating through this will require a careful balancing act particularly as the UK would like to reset (closen) its relationship with the EU whilst also striving not to do anything to disrupt its relationship with an unpredictable US administration. The next four years are going to be eventful!
