The tariffs implemented in 2017, and the potential tariffs projected for 2025 reflect different economic climates, policy objectives, and international trade dynamics. Here is a comparison of these tariffs, along with their potential ramifications in the food ingredient space:
2017 Tariffs
Overview:
- The administration introduced tariffs primarily on steel and aluminum (25% on steel and 10% on aluminum) and launched a trade war with China, imposing tariffs on a wide range of goods, including agricultural products.
- These tariffs were aimed to protect American industries, reduce trade deficits, and promote domestic manufacturing.
Impact on Food Ingredients:
- Increased Costs: Tariffs on imported food ingredients, such as erythritol, allulose, fibers, stevia, and monk fruit, led to increased costs for food manufacturers. These costs were often passed on to consumers, contributing to higher prices in grocery stores.
- Supply Chain Disruptions: Manufacturers dependent on imported ingredients faced supply chain disruptions, leading to delays and shortages.
- Retaliatory Tariffs: Countries affected by U.S. tariffs imposed retaliatory tariffs on U.S. agricultural exports, impacting farmers and producers. U.S. soybeans, for example, faced significant challenges in the Chinese market.
Potential 2025 Tariffs
Overview:
- Potential tariffs in 2025 may arise from ongoing geopolitical tensions, shifts in trade policy, or efforts to address trade imbalances and support domestic production.
- Trump said he will impose a 10% or 20% tariff on all imports across the board, along with an additional tariff of between 60% and 100% for products imported from China. [i]
- These tariffs could target specific sectors, including food ingredients, based on the focus of future U.S. trade policy.
Potential Impact on Food Ingredients:
- Further Cost Increases: If tariffs are implemented on key food ingredients, manufacturers will face even higher production costs, exacerbating inflationary pressures on food prices.
- Market Access Issues: New tariffs could limit U.S. access to foreign markets, affecting exports of food ingredients and agricultural products. This could lead to a decline in U.S. competitiveness globally.
- Shift in Sourcing: Companies may need to reevaluate their sourcing strategies, potentially front-loading raw ingredient purchases or trade free zones to mitigate or postpone tariff impacts. This shift could affect the availability of food ingredients.
- Innovation and Adaptation: Food manufacturers might need to innovate in response to tariffs, developing new products or reformulating existing ones to utilize more domestically sourced ingredients, which could alter product offerings in the market.
The tariffs from 2017 had significant ramifications for the food ingredient sector, impacting costs, supply chains, and market access. Potential tariffs in 2025 could further complicate the landscape, leading to increased costs, sourcing challenges, and innovation demands. As the global trade environment continues to evolve, stakeholders in the food industry must remain agile and responsive to navigate the complexities introduced by tariffs and trade policies.
Icon Foods is here to help you get ahead of potential supply chain issues and dramatic cost increases. Schedule a call with Icon Foods to strategize your next move.
[i] https://www.emarketer.com/content/trump-tariff-plans-prices-skyrocket
