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The European Union is preparing for significant price increases on a range of consumer goods as new tariffs imposed by the US take effect.
Following President Donald Trump's announcement of a 25% tariff on steel and aluminum, the EU has responded with countermeasures targeting approximately €26 billion worth of US exports, including a wide array of food products.
Starting April 1, the EU will impose tariffs on various American goods, including peanut butter, bourbon and orange juice. The potential impact on the food and beverage industry is significant, with many stakeholders warning that consumers will bear the brunt of these price increases.
The EU's response echoes previous trade tensions, particularly those seen during earlier tariffs in 2018 and 2020. This time, a nearly 100-page list of goods, including meat, dairy, fruit, wine and spirits – as well as non-food items – is circulating as part of an escalating EU-US trade dispute. For some businesses the stakes could be high, with potential disruptions to supply chains and increased costs posing serious challenges.
Cognac producers in France are also facing dire prospects. With a substantial portion of their production aimed at the US market, the potential for a 25% import tax poses a serious threat to their profitability and job security.
According to the BBC's reports, an EU official suggested that products like soybeans and orange juice could be sourced from countries such as Brazil or Argentina, which may alleviate some pressure on consumers. However, the transition to new suppliers may not be straightforward and could lead to further disruptions in the market.
Impact on F&B segments
Spirits
The spirits industry is particularly vulnerable to these developments. Many European producers rely heavily on exports to the US, which has historically been a lucrative market for products like whiskey and cognac.
Pauline Bastidon of Spirits Europe pointed out that the reintroduction of tariffs threatens to undermine the recovery efforts made since the suspension of earlier tariffs.
She expressed concern, stating: "Spirits Europe is extremely worried about the renewed threat of tariffs on both EU and US spirits, especially as they are being linked to a completely unrelated dispute. This ongoing cycle of retaliation must come to an end. We urge both sides to stop using our industry as a bargaining tool in conflicts that don’t concern us."
"The spirits trade demonstrates the benefits of open markets for all involved. Reintroducing tariffs would be a step backward, negatively impacting businesses, workers, and consumers on both sides. The EU and US must de-escalate this situation and ensure that spirits are never again caught in the crossfire."
She continued: "Since 1997, transatlantic spirits trade has thrived without tariffs, despite a few damaging interruptions due to unrelated disputes. Our industry is united in ensuring it remains that way. EU spirits companies have made significant investments in US production, including American Whiskey, while US companies have distilleries across the EU, producing products tied to local heritage. Our markets are intertwined through investment, tradition and mutual success."
Meanwhile, cognac producers in France are facing particularly dire prospects. A significant portion of their production is aimed at the US market, and the potential for a steep import tax poses a serious threat to profitability and job security.
Meat and dairy
The meat and dairy sectors are also likely to be significantly affected by the new tariffs. With the EU considering imposing tariffs on US meat and dairy products, the potential for increased costs could lead to a ripple effect throughout the food supply chain. European consumers may find it increasingly difficult to source these essential items at reasonable prices.
For instance, US exports of beef and pork have been popular in various European markets, and any tariffs could make these products less competitive compared to locally sourced alternatives. This shift could lead to reduced availability of certain meats, driving up prices not only for imported products but also for domestically produced meats as demand shifts.
Moreover, dairy products such as cheese and milk from the US are also at risk. The EU has a robust dairy industry, but the loss of US imports could create a vacuum that may not be easily filled, potentially leading to shortages and increased prices for consumers.
Broader economic impact
As the EU prepares to implement these tariffs, food and beverage manufacturers are urged to adapt to the changing landscape. The potential for increased prices across supermarkets in Europe is imminent, with consumers likely to see higher costs for American imports.
Industry leaders are calling for a collaborative approach to navigate the challenges posed by the ongoing trade war, highlighting the need for stability in the food supply chain.
The situation underscores the interconnectedness of global trade and the vulnerabilities faced by the food and beverage sector amid rising geopolitical tensions. Stakeholders are closely monitoring developments, with the hope that dialogue between the EU and US will lead to de-escalation and a resolution that minimises disruption to the market.