John Giles, divisional director of Promar International, analyses the likely fallout from Trump’s new tariff regime
President Trump’s announcement of new US tariffs has left the global economy, including the horticulture sector, feeling increasingly uncertain. This is just another factor adding to the pressure that the sector has been facing over the last five years from a series of supply chain shocks.
Anything that adds to these supply chain shocks is unwelcome. In these circumstances, horticultural companies, wherever they are based, need to be resilient and nimble in how they operate. The picture might look quite pessimistic; however, it could be argued that until a few days ago, the UK was one of the “winning” countries, if it is possible to have these, in what overall appears to be a lose-lose situation. Europe, for example, was facing tariff rates of 20 per cent.
A fast-changing situation
However, in this fast-changing geopolitical environment, tariffs can change again at any time, literally almost overnight, in some cases. And they did. The US announced it would revert to a flat 10 per cent tariff for all countries, with the exception of China. This situation will last for 90 days. After that, there is more uncertainty as to what happens next. If the situation reverts to the original announcement, after this 90 day stand off, these original rates will still apply.
The knock-on effects of the new US tariffs might be less directly related to the horticultural sector per se, but rather the threat of the world economy falling into recession. One only has to look at the initial reaction of world stock markets over the last week or so to the current situation and how volatile they are at the moment, to see the dangers of this. A severe global recession would help no one.
Countries with most at stake will be worst hit
Beyond the UK and EU, how other countries will be affected varies because of the tariff itself and the level of trade with the US. Countries such as Mexico, will be dramatically impacted, as they are facing a potential import tariff of 25 per cent and in the last few years they have accounted for 61 per cent and 42 per cent of the total US imports of fruits and vegetables, respectively. Canada is also facing a 25 per cent import tariff and accounted for 18 per cent of the total US imports of vegetables in the last 10 years.
Other Latin American countries, such as Chile and Peru already faced a 10 per cent import tariff and accounted for 11 per cent and 8 per cent of the total US fruit imports in the same timeframe. Asian countries, such as Vietnam face potential import tariffs of 46 per cent, while China’s tariff might be up to staggering 145 per cent. China accounted for 3 per cent of vegetables and 5 per cent of fruits imported into the US between 2015 and 2024.
For EU suppliers, the likes of Spain, Portugal, Italy, Germany, Poland and Greece all have some track record of exporting to the US, but in most cases, the volumes and value of this trade is relatively small.
The domestic market might be where US produce finds a new home?
The domestic US market, due to its size, could absorb some of the volumes that would otherwise be part of US exports and may in the short term, be the most obvious opportunity, especially if imports are restricted. However, more produce on the US market could see prices supressed unless demand also increases. This is good for consumers, but less so for producers and distributors.
What of US exports?
The US exported US$5.8bn of vegetables and US$16.4bn of fruit in 2024. Canada is the main market for US horticultural products, accounting for 61 per cent of vegetable exports and 25 per cent of fruit exports from 2015-2024. Mexico follows Canada, accounting for 9 per cent of vegetable exports and 7 per cent of fruit exports in the same period.
Other important markets for US horticultural products in the last 10 years include India (6 per cent for fruits), Japan (10 per cent for fruits and vegetables), and other Asian countries such as Hong Kong (5 per cent for fruits), South Korea (5 per cent for fruits), and China (6 per cent for fruits and vegetables). European markets for fruits include Germany and Spain, each accounting for 5 per cent of the total US fruit exports from 2015 to 2024. The UK and the Netherlands each accounted for about 2 per cent of the total US vegetable exports in the last 10 years.
Other countries initially reacted to Trump’s punitive tariffs by increasing their own tariffs on the US, with the most notable examples being China and Canada. Latin American and African countries traditionally haven’t been markets of interest for US horticultural products, and developing these markets would mean virtually starting from scratch in some countries.
New levels of complexity
The imposition of these reciprocal tariffs by the US has introduced a new layer of complexity and uncertainty to the global economy. The overall impact on global trade dynamics cannot be understated. Countries like Mexico, Canada, and China which have significant trade volumes with the US, are likely to experience substantial disruptions to trade.
How the exporting countries to the US will react to the 10 per cent tariffs is not yet fully known. Some countries are looking to reach out to the White House to negotiate for lower tariffs. This approach has been taken by more than 50 countries in the first five days after the initial tariff announcements. How successful they will be is yet to be decided, beyond this 90 day period announced in the last few days.
New market opportunities for some?
For the EU countries, the direct impact of this situation is likely to be less severe, although there will inevitably be concerns over displaced products from other countries who might see Europe as an alternative market to the US.
The potential for market diversification clearly exists, but it presents significant challenges and requires time to develop viable alternatives to the US market. Markets such as India might well open up for some suppliers if the US faces very high tariffs there going forward. We have also heard of Canadian importers looking to source from the EU for some products rather than use growers/exporters in the US.
But this is not over yet….
Only the coming months will reveal the true extent of the impact on, and the effectiveness of, the responses from the international fruit and vegetable sectors. What seems clear though, is that these tariff developments are not over yet. The last few days have shown us to “expect the unexpected” and this type of uncertainty is the way things will be, for a least the immediate future.
John is a Divisional Director with Promar International, the agri food consulting arm of Genus plc and has worked on fresh produce assignments in some 60 countries including in the UK and rest of the EU, Central and North America, SE Asia, the Gulf region and China.
