US-EU Deal: European food industry fears for its competitiveness

In the wake of the agreement reached between Donald Trump and Ursula von der Leyen, while the customs duty was clearly set at 15% on products exported by the EU to the United States, the real consequences remain uncertain and the difficulties significant, particularly for the food industry.

The American president and the president of the European Commission have therefore agreed to impose a 15% customs duty on EU products entering the USA. While a tax is never pleasant to endure, this puts an end to months of excessive threats of doubling the agreed rate, which promised to be devastating for producers on the old continent who depend on overseas sales for their olive oil, wines, and cheeses, for example. This agreement at least brings clarity and a relative dose of certainty.

However, the result is a sense of purely political agreement, without any precise indications of how it will be interpreted in practice. Naturally, this represents a serious trade tightening compared to the average rate of 1.2% in effect before Trump's return to the White House. De facto, European agri-food products will now be less competitive, which risks hampering growth opportunities in this very buoyant market, points out CELCAA (European Liaison Committee for Agricultural and Agri-Food Trade), the umbrella organization of European associations and businesses based in Machelen.

Which foods and drinks will suffer the most?

So far, the US president has not been very explicit about how the new tax would be applied to different European products. This makes it difficult for European exporters to quantify the additional costs, predict margin reductions in an attempt to absorb them, or pass them on to consumers.

Companies will likely rethink their supply chains more broadly, opting for countries with lower tariffs, such as Mexico. This situation does not allay all fears and may even introduce new risks related to politics, the economy, infrastructure, and even the climate.

In Belgium, people are quite spontaneously worried about fries and chocolate. "There are really three sectors that are more exposed than others: potato processing, that is, fries; chocolate and confectionery; and then pastry, bakery, waffle, and biscuit industries," the spokesperson for Fevia, the Belgian food industry federation, told RTBF from the aisles of the Libramont Agricultural Fair. With 75% of their turnover coming from the American market, the fears of these sectors are far from unfounded.

Inevitable repercussions?

Behind the questionable symbolism of this American-European agreement, a vast industrial and commercial repositioning project is underway, with new negotiations with buyers and new cost impact schemes. The United States is the fourth largest trading partner of the Belgian food industry, representing 2.5% of total exports, worth approximately one billion euros. For information purposes, the economic weight of food exports rises to more than 73% for Europe.

At the time of writing, Belgian consumers are not directly affected. But through a domino effect, if the Americans were forced to foot the political bill, they could turn away from our products, and the loss of European competitiveness there would be felt in the single market here. This weakness comes at a particular cost, if we are to believe the exports of the Walloon food industry, whose production last year reached its lowest level since 2017 (-2.9% of turnover).