On 2 April 2025, Donald Trump announced that all countries would be hit with a blanket 10% tariff on all goods imported into the US. In addition to this, he announced that 60 nations would face additional reciprocal tariffs. This included (at the time) a 34% tariff for China, 20% for the EU and 26% for India, amongst others.
The baseline 10% tariff came into effect on 5 April 2025, and the additional tariffs came into effect shortly thereafter on 9 April 2025. It is currently unclear whether more tariffs will come, and also, how the UK Government will ultimately respond.
The tariffs, and the ongoing uncertainty as to their scope and duration, is likely to affect and cause concern for businesses and consumers alike across many different industries, including the Food and Beverage industry.
Why might the food and beverage industry be particularly concerned by Trump’s tariffs?
The UK Food and Drink Federation reported within their 2024 Q3 Trade Snapshot that the US is the third most important export market for the food and drink sector, with 13% of the industry’s exports (by value) being sent to the US. The Federation’s following Q4 Trade Report reported that their members considered increased taxation to be one of their greatest concerns.
These new tariffs will, undoubtedly, increase costs for many businesses across the industry. Some businesses will be directly affected, such as those businesses that supply goods directly to the US and so are required to pay the tariffs. Others will be affected indirectly, for example businesses facing price increases from suppliers within their supply chains which are located in countries which are subject to even higher US tariffs, and which seek to renegotiate terms and/or pass on such cost increases.
It is therefore not only those businesses which directly export goods to the US that will be concerned – the economic impacts could be much wider ranging.
Any direct or indirect increase in costs will (unless mitigated by the business) have an adverse impact on profitability. This could, in turn, hamper growth plans, or even threaten the survival of such businesses.
Businesses will be looking to mitigate the impact of the increased costs caused by these new tariffs – often by seeking to pass on some or all of such costs on to their consumers. Where part of a supply chain, they may also seek to renegotiate contract terms with their suppliers.
Food and beverage giants Unilever and Nescafé have already indicated that they anticipate difficulties will be caused by ingredient costs rises. Nestlé, which owns brands including KitKat confectionery and Felix cat food as well as Nescafé, have already increased its prices by over 2% in the first three months of 2025.
If these multinationals are increasing their costs, then what impact could these tariffs have on smaller businesses who may not wish (or be able to) to pass on such additional costs?
Well, it could result in some businesses looking to reduce, or even stop, their exports, or involvement in supply chains which export to the US. They may seek to renegotiate affected supply contracts. However, that might be easier said than done, given the often complex contractual and multi-jurisdictional nature of such supply chains. The correct termination or renegotiation of such contracts will almost certainly require specialist legal and other expert advice, in order to navigate and avoid the risks associated with otherwise breaching the existing contractual terms, and the financial implications of doing so.
What should a business consider if it wants to terminate, or renegotiate a contract?
If a business is looking to terminate or renegotiate a contract, careful consideration must be given to ensure that it does not expose itself to the risks of costly and distracting disputes, and possibly even court proceedings.
As noted above, many businesses within the food and beverage industry will be parties to supply chain contracts which may involve multiple other parties in multiple jurisdictions. A crucial first point to identify which law and jurisdiction governs the contract – which may not necessarily be those of England and Wales.
If a business wishes to terminate any of its contracts, then it should consider whether there are specific termination provisions within the contract. It is common for contracts to provide that termination can only be permissible under certain carefully prescribed circumstances. If a contract is not terminated in compliance with the parameters specified in the contract, this could place the business at risk of a claim for breach of contract, and remedies including damages suffered as a result of the breach, or an order of specific performance to force the business to continue to comply with its obligations.
A business may also wish to consider less drastic action than termination of a supply contract. The increase in costs might be such that they will not be terminal to the contractual relationships in the longer term if certain provisions, such as pricing, can be re-negotiated. It is unlikely that the contract will allow any party to force such changes unilaterally, so any changes would need to be carefully negotiated and then appropriately documented once agreed. Contracts often provide that any variations will not become binding unless they are agreed in writing and signed by all parties.
It is prudent for businesses to schedule and conduct regular reviews of all key commercial contracts as a matter of best practice in any event. With Trump’s tariffs and the uncertainty that they are causing, keeping such contracts under close scrutiny is as important as ever.
If you have any concerns about contractual terms, or what steps your business might be able to take with regards to its contracts, please do get in touch with our Commercial Litigation Team.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at May 2025.