US/EU trade deal delivers significant financial headache for businesses and consumers

These past few days have seen a momentous shift in US/EU relations as the American president hailed a deal in which 15% tariffs will now be levelled in a blanket fashion across the European continent.

It includes $600 billion European investment in American energy, goods and military equipment – with very little clear information on quite what is being promised by the other side, other than not imposing a threatened 30% taxation rate for imports.

Significantly, as has just been released, the US labour market added just 73,000 jobs to its overall total in July, which was significantly lower than anticipated, which is widely considered by market analysts to have been linked to the uncertainty over tariffs within the US causing caution in many American businesses, with the unemployment rate also reportedly rising from 4.1% to 4.2% in the country.

Tellingly, key European leaders have been quick to dismiss the terms of deal as being not in European interests – with German Chancellor Friedrich Merz reportedly stating it would ‘substantially damage his country’s finances,’ while the French Prime Minister was also said to be equally unimpressed by the agreement.

There has been particular consternation that the EU’s deal appears worse than the UK’s (where ‘only’ 10% tariffs have been levied by the US – but ironically, they can in no way seriously be considered reciprocal as America has insisted, as we don’t carry any kind of trade deficit with the US, though VAT is applicable, as it would be with any domestic company buying from many categories of products.

As for the US/EU deal itself, this is of course a multi-sector deal, but what could it mean for the confectionery, snacks and bakery sectors? The US president has publicly stated on numerous occasions that companies “will eat the tariffs” and not pass them on to consumers – but the financial reality for many businesses, be that SME enterprises, or major corporations, that significant hikes in import costs for components and ingredients as a matter of fact has to be passed down to the consumer.

This is clearly already set to happen within the confectionery sector, as Hershey confirms plans for double-digit price increases – which it has reportedly said are not linked to tariffs, as it confirms that it is in fact due to pay up to $180 million in fresh import taxation under that very same national policy, with cocoa prices continuing to remain comparatively high.

Indeed, as Confectionery Production has observed, it appears the tariff policy is having an unintended benefit for confectionery companies with manufacturing bases outside the US, including Canada (which is witnessing a 10% rise in export across its nearest border, and Mexico, with businesses such as Barry Callebaut, which has manufacturing operations in those nations, already reaping the benefit of not being based in America.

Quite where this saga will end is hard to say, as the frequency and changes to the tariffs on a weekly and monthly basis have kept analysts very much on their toes. Such policies defy conventional trading logic and it’s clear that the major losers from the ‘US trade wars’ will ultimately be consumers, as they are forced to pay ever-higher prices for a host of goods, including confectionery.

Neill Barston, editor, Confectionery Production 

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