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The recent trade agreement between the United Kingdom and the United States, known as the Economic Prosperity Deal, represents a significant shift in international trade relations, particularly for the food and beverage sector.

"We have £1.5 trillion invested in each other’s economies, creating 2.5 million jobs across both countries," said Prime Minister Keir Starmer, commenting on the landmark economic deal. "It will provide vital assurances for our life sciences sector – so important to our economy – and grant unprecedented market access for British farmers, without compromising our high standards."

Karen Betts, chief executive of The Food and Drink Federation (FDF), added: “This is very positive news for the UK economy, and to be welcomed. There is obviously still the question of the 10% tariff that continues to apply to food and drink exports. We hope that this deal creates the space and momentum for continued discussions about removing those tariffs too.

She continued: “The US is UK food and drink’s third biggest export market, with £2.7 billion worth of goods exported there in 2024, many of which are produced by small and medium sized businesses. Government can make a real difference here by providing greater practical guidance and support to help more food and drink businesses find new customers abroad.”

Key highlights of the trade agreement

1. Reciprocal market access for beef

One of the most notable features of the trade deal is the allowance for UK farmers to export up to 13,000 metric tonnes of beef to the US tariff-free. This measure is expected to enhance the competitiveness of UK beef producers, particularly those adhering to stringent animal welfare and quality standards. The US market is characterised by a growing demand for premium beef products, which aligns well with the UK's reputation for high-quality meat.

2. No compromise on food standards

The UK government has highlighted that the deal will not compromise existing food safety regulations. UK food producers have long been concerned about potential changes that might lower standards. The assurance that imports will meet UK food safety criteria is crucial for maintaining consumer trust and ensuring that domestic producers can compete effectively.

3. Tariff Reduction on ethanol

The agreement includes the removal of tariffs on ethanol imports from the US, which could reduce costs for UK manufacturers who use ethanol in various products, such as beverages and processed foods. This change may lead to lower retail prices for consumers and increased margins for producers.

4. Elimination of tariffs on steel and aluminum

The elimination of tariffs on steel and aluminum imports could indirectly benefit the food and beverage sector by stabilising the supply chain for packaging materials. As packaging costs decrease, producers may find it easier to manage expenses and maintain competitive pricing for their products.

Opportunities for growth

Expanding export markets

The US is currently the third-largest market for UK food and drink, with exports valued at £2.7 billion in 2024. The trade deal provides a framework for UK producers to expand their market share in the US, particularly in sectors such as dairy, beverages and processed foods. Small and medium-sized enterprises are expected to benefit, as they often produce niche products that can appeal to American consumers looking for quality and authenticity.

Strengthening the supply chain

The reduction in costs for essential materials such as steel and aluminum can lead to more efficient production processes. For example, reduced packaging costs can enhance profit margins for food and beverage companies, allowing them to reinvest in product development and marketing.

Enhanced collaboration and innovation

Since leaving the European Union, the UK has actively sought to establish and strengthen trade relationships with countries outside of Europe. This is part of a broader strategy to diversify its trade partnerships. The trade deal with the US is indeed expected to foster collaboration between UK and US companies. Such partnerships can lead to increased innovation, particularly in product development.

These collaborations can result in the creation of new products that align with shifting consumer preferences, particularly in areas like plant-based foods and health-oriented beverages, which are experiencing significant growth in demand.

Increased investment opportunities

The positive outlook created by the trade deal may attract foreign investment into the UK food and beverage sector. US companies may seek to establish partnerships or invest in UK firms to gain access to high-quality products and innovative technologies.

Challenges ahead

While the UK-US trade deal presents numerous opportunities for growth and collaboration, it also introduces several challenges that stakeholders in the food and beverage industry must navigate. These challenges could impact the ability of UK producers to fully capitalise on the benefits of the agreement and may require strategic planning and adaptation.

Remaining tariffs

Despite the benefits, the 10% tariff that remains on many food and drink exports is a significant concern. Industry leaders have expressed that this tariff could hinder the full potential of the trade deal. Continued advocacy for tariff reductions will be necessary to maximise export opportunities.

Market competition

UK producers will face increased competition from US food and beverage companies looking to penetrate the UK market. This competition may pressure UK businesses to innovate continuously and improve their offerings to maintain market share. Additionally, US products often benefit from established brand recognition, which may pose challenges for UK exporters.

Regulatory compliance

Navigating the complex regulatory frameworks of both the UK and US markets will be essential for successful exports. UK producers must ensure compliance with both countries’ food safety standards, labeling requirements, and import regulations. This can be particularly challenging for SMEs that may lack the resources to manage compliance effectively.

Impact on domestic prices

As UK producers increase exports to the US, there may be concerns about domestic supply and pricing. If producers prioritise the lucrative US market, it could lead to higher prices for UK consumers, particularly for premium products.

Continued economic strain

In adirion, analysts at GlobalData point to growing economic strain and the rising cost of living as major contributors. At the heart of these challenges are intensifying trade tensions and widespread tariffs, which are placing mounting pressure on both businesses and everyday consumers.

Prerana Manral, senior consumer analyst at GlobalData, commented: “Tariffs are no longer just a policy debate; they are a real-time input cost multiplier. Fast-moving consumer goods brands, especially those with global supply chains, now face a tough choice: absorb shrinking margins or pass costs on to consumers at the risk of demand deflation.”

Manral highlights GlobalData 2025 Q1 survey results: "In the US, 56% of consumers say they are 'extremely' or 'quite concerned' about the impact of trade wars and import tariffs on product pricing. Similarly, the Michigan Consumer Sentiment Index sank to its lowest level since 2022, as Americans brace for higher inflation and continued economic strain. Persistent inflation, amplified by tariffs, is fueling consumer anxiety, curbing discretionary spending, and increasing price sensitivity and country-of-origin awareness.”

Prerana concluded: “Tariffs are not only inflating operational costs but also reshaping consumer expectations, trust, and purchasing behaviour. The decline in the US happiness ranking is a multifaceted issue, but the correlation with economic factors, particularly those influenced by trade policies and tariffs, is evident. As consumers face higher prices and companies navigate increased costs and uncertainty, this impacts the collective sense of wellbeing.

“In this context, FMCG brands must prepare for more volatile policy environments and design strategies that address both the economic and emotional dimensions of consumer behaviour. This includes resilient pricing models, localised sourcing, and transparent consumer engagement that builds trust and loyalty in uncertain times.”