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Will Trump lower tariff hikes?

The US President’s plan to reduce the 145% tariffs on China’s food and beverage market raises questions over whether a turnaround is likely for other regions.

Hailed as “Liberation Day”, on 2 April, the Trump administration brought in a range of tariff hikes, including a global baseline of 10%. Starting from 5 April, barriers emerged after the US government reported that the country’s trade deficit in goods exceeded $1.2 trillion (€1.1 trn) in 2024.

Higher tariffs, above the baseline, apply to certain countries and came into effect from 9 April, including 20% on food and beverages (F&B) in the European Union (EU), 49% in Cambodia, 47% in Madagascar, and 44% in Sri Lanka, among others.

Additionally, a 154% tariff was imposed on products from China, a country whose exports to the US totalled approximately $450 billion (€395 bn) in 2023.

However, as reported later that month, Trump said he planned to lower China’s tariff, stating: “145% is too high. It will come down substantially.”

The new trade normal

Major F&B exports to the US from around the globe are now experiencing the reality of higher costs to trade with the North American market, which in 2024 achieved annual retail sales of $1,000.6 billion.

Manufacturers from across the industry, including in the cheese, chocolate, fruit and vegetables, olive oil, wine, beer, and spirits sectors, are now subject to the increased tariffs.

Announcing the new measures, Trump said that foreign trade and economic practices had created a national emergency. The White House said it was reclaiming its economic sovereignty in its official fact sheet. Underpinning this stance is the belief that tariffs are necessary to achieve fair trade and lower the US trade deficit.

According to the Budget Lab at Yale University, the US tariff increases to date in 2025 have resulted in raising $3.1 trn, which includes the impact of retaliations.

F&B industry calls for a rethink

Voices from across the sector criticised the US government’s decision to impose higher tariff rates on countries worldwide.

“Europe’s food and drink industry deeply regrets the US’ decision to impose 20% tariffs on imports from the EU, given the impact it will have on transatlantic trade, businesses and consumers,” industry association Food Drink Europe said.

The organisation added that it was reiterating its call to de-escalate trade tensions and is backing the EU’s plan to reach a negotiation.

In a press release, the European Dairy Association (EDA) condemned the sweeping tariffs on EU goods, saying the impact on the dairy industry was unjustified. It called on the European Commission to respond strategically and protect the EU industry from further detrimental impacts.

“Trade policy must be smart, not punitive. Dairy is not the problem here, using it as a pawn only creates new problems on both sides of the Atlantic,” said Alexander Anton, secretary general of EDA.

European body CELCAA, which supports traders in agri-food commodities, published its “disappointed and saddened” response to the tariffs.

“It is a sorry day for trade and, ultimately, for the consumer in the US,” it said.

According to leading European bank ING, EU manufacturers and exporters across the food and agricultural value chain have expected this increase, following rising US inventories.

“The uncertainty about the duration of these tariffs makes it more complex to determine what the next response will be at the company level,” said Thijs Geijer, senior sector economist covering the food and agriculture sector at ING.

Strategies for surviving the tariff increases

In the short term, ING said that F&B manufacturers have several options in response to the US tariff increases.

Price is one area where producers can focus on adjusting or negotiating costs to reach a new optimum level that balances their product volumes and margins.

However, this would result in manufacturers making the tough choice between absorbing these prices or passing them on to price-sensitive consumers already navigating ongoing cost-of-living concerns.

As the tariff hikes originate in the US, ING also suggested producers maximise output in US processing facilities to utilise their production plants, units, operations, and resources to support their manufacturing and innovation. Investing in additional US production capacity is another beneficial strategy to help manufacturers navigate tariff increases.

ING also stated that F&B manufacturers could consider engaging in more value-adding activities, such as packing and bottling goods in the US, to lower the dutiable value of imports.

Finally, it recommended adopting an outward-looking approach beyond the US to bolster brands’ capabilities.

Reconfiguring supply chains to optimise how products flow between countries, growing sales in the EU market at the expense of imported goods, and increasing sales in alternative markets outside the EU, such as Mexico and Southeast Asia, are also options that manufacturers can explore in the coming months.