Trump’s tariffs: What could be the impact on EU food and agriculture?

The EU is largely self-sufficient in food and agriculture products, except for soy (used as animal feed) and tropical products. European production surpluses find their way to various global markets, with a significant portion heading to the US.

The EU’s food and agriculture exports to the US amount to EUR 38bn, while imports are only EUR 14bn. Hence, from a trade perspective, the US appears to be more important for the EU than vice versa. The EU exports a diverse array of processed food products to the US, including wine, distilled spirits, dairy, and processed fruits, while importing commodities and intermediary products, such as soy and forest products, from the US.

If the US imposes tariffs on food and agriculture products from the EU, US importers would bear the cost. This would make EU products more expensive and put pressure on the competitive position of EU exporters to the US. An assessment of the impact of these potential tariffs shows that agricultural machinery would be most impacted. Medium impact is expected for beverages, fruit and vegetables, dairy, and seafood.

Facing tariffs, EU companies have five key responses to choose from: stick to their prices and shift the burden to US importers when demand is price inelastic; lower prices to stay competitive; withdraw from the US market; redesign their supply chain to serve the US market from a country that’s not subject to tariffs; or invest in domestic production within the US.

A global trade war would have effects far beyond the original trade flows due to interactions between regions and sectors.