How will Donald Trump affect the global food industry?

Donald J. Trump. He’s a businessman, a TV personality, and now, he’s the 45th President of the United States of America.

Whether it’s due to his unorthodox ascent into politics or his (very frequent) controversial outbursts, he’s all over our televisions, newspapers and magazines. Judging by his approach and actions throughout the election process up until his first few days as POTUS, it’s safe to assume that he’s going to be the centre of attention for quite some time yet.

Regardless of how anybody may feel about him or his policies, the fact is that we can expect to see big policy changes over the next four years. Thee changes are sure to have a significant impact on international trade. In particular, it’s interesting to consider how these changes will affect the global food industry.

 

Trump and Globalisation

During his election campaign, Trump was verbal in his opposition to globalisation and free trade, claiming that:

Globalisation has made the financial elite who donate to politicians very, very wealthy … but it has left millions of our workers with nothing but poverty and heartache.

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Daniel W. Drezner, a professor of International Politics at the Fletcher School of Law and Diplomacy at Tufts University said that Trump: “talks about the economy only in the language of globalisation.”

“It’s globalisation that’s wrecking the American economy, and that’s how I’m going to fix it,” he said of Trump’s rhetoric.

global food industry impact of trump

42% of respondents to the just-food 2017 Confidence Survey think global trade will become more restricted as a result of Trump’s protectionist agenda. And it’s not surprising, either, given that Trump has often been critical of trade deals such as the North American Free Trade Agreement (NAFTA), which he has described as “the worst trade deal maybe ever signed anywhere”.

Another agreement that Trump has voiced his opposition to is the Trans-Pacific Partnership (TPP). He has said:

“I strongly oppose TPP as drafted and will work hard to develop trade agreements that are in the national interest and benefit American workers including our farmers.”

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For companies that are a part of the global food industry, such as PepsiCo and Mondelez, who are looking to (or already have) invested in China, this could pose difficulties down the line.

Trump has also spoken about how he would favour a 45% tariff on Chinese exports to the USA.

donald trump affect on global food industry

The effect on the food industry in the US

 

Prices will go up

This anti-globalisation stance that Trump appears to have adopted could cause food prices to increase. If Trump chooses to impose tariffs on food coming into the US from Mexico and stem the flow of immigrant workers, the agricultural situation in the US will drastically shift. 78% of US farmers are, in fact, foreign-born and crossed a border to get to the US. By cutting them out, food production is likely to take a big hit.

As a result of this, retail food prices are expected jump an average of 5-6%. What’s more, the quantity and variety of grocery store produce may also diminish.

Less regulation and red tape may be perceived a good thing for businesses at first, but in the long run, it’s likely to lead to further price increases, as explained further below.

Food safety will decline

Trump made it clear in a fact sheet that accompanied his latest tax plan that he intends to scale back government regulations, including food safety and environmental measures, in order to save almost $1 trillion over the next decade.

Reducing the power of the Food and Drug Administration (FDA) is likely to lead to limits on guidelines on planting, hygiene, production and food processing. Food-borne illnesses and ‘fraudulent’ foods (cheaper alternatives used as substitutes) are likely to increase.

global food industry food safety

 

Sustainability will reduce

Trump has made it clear that he doesn’t believe in the validity of climate change. Now he’s in office, he seems to be sticking to his word. His administration has already removed the phrase ‘climate change’ from the White House website. They also shared his ‘America First Energy Plan‘, which involves the removal of certain regulations, including the “harmful and unnecessary policies such as the Climate Action Plan and the Waters of the U.S. rule.”

As such, it’s reasonable to expect a reduction in US soil quality. The use of pesticides and the impact of severe weather conditions resulting from climate change will negatively affect the country. As the quality of land decreases, the more land becomes unusable for food production. These factors will all contribute to the rise in food prices.

 

global food industry increase in food prices

 

What does this mean for the future?

Unfortunately, Trump never set out a clear manifesto for the food and beverage industry. But, given his other policies and his general approach to date, we can make a few assumptions. Ultimately, we can expect to see:

  • An introduction of tariffs for multinational food companies
  • A lack of regulation or policy for health and nutrition
  • A reduced focus on environmentally sustainable approaches to agriculture
  • Deregulation in terms of food safety

But, we can’t say any of this will happen for sure yet. America’s future seems to be taking a dramatic turn away from the policies that the Obama administration tried to implement. However, it’s unclear what this means for the rest of the world. We can only wait to see how Trump’s presidency will play out and what effect it will have on the global food industry.

Do you have any thoughts on the future of the global food and beverage industry? Let us know in the comments below.

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