Wild geopolitical swings bad for food trade and security
We are living in interesting times. Scary times, even. Whatever your political views, it is hard not to shudder when more and more world leaders lean into the far right, xenophobia and protectionism and retrench into own-country-first ideologies. Prime example of this, obviously, is Donald Trump’s second coming. But he is not operating in a vacuum. All over the world, leaders have come to the fore, many democratically elected on the basis of populism and the offering of apparently easy solutions which play on xenophobia and protectionism.
Globalisation has improved global prosperity
Globalisation may have its critics, underpinned as it is by market capitalism, but it has contributed in no small way to increase prosperity globally including in developing countries, transforming some to very much developed countries.
In essence, from the 17th to the early 20th centuries, trade was taking place in the context of colonialism and came at a cost in natural resources to the originating countries, with little or no economic or developmental benefit to them. Globalisation as it is defined today started in the 19th century, with the largely one-way exploitation of natural resources from colonised countries by colonisers.
After World War Two, trade became more codified by the General Agreement on Tariffs and Trade, which then became the World Trade Organisation, and agreements to reduce impediments to trade progressively helped global trade increase exponentially. Goods traded between countries currently account for 50% of the value of total global output. Trade with wealthier Western countries enabled more countries to increase their economic wealth and power. Remarkably, it transformed the economies and geopolitical weights of countries like Brazil and China.
The demagogue politicians who seek to enrol the fear of job losses from the competition of imported goods are being dishonest. There is ample evidence that, while trade may negatively affect job opportunities for specific groups of people, it does not necessarily imply a negative overall effect on the household. This is because, while trade may affect wages and employment, it can also reduce the consumer prices of goods.
Furthermore, according to this World Bank report, global trade from 1995 to 2019 has also enabled higher employment, earnings and productivity levels. In developing countries, participating in global trade has also reduced within-country inequality, and has been linked to greater female participation in the manufacturing workforce. In fact, export growth is positively linked with labour productivity especially of low-skilled workers in low-tech manufacturing and agriculture in developing countries.
Tariffs make goods, including food, more expensive
That being so, it is equally dishonest for politicians to present to the electorate the implementation of tariffs as a solution which will improve their economic well-being by asserting the negotiating strength of the country imposing them.
Tariffs are effectively a tax on imports, and have had a lot of press lately, with US President Trump announcing he will implement up to 25% tariffs on goods from Canada, Mexico, the EU and more. While tariffs are not illegal under WTO as retaliation for prior anti-trade action, the organisation’s stated aim is to reduce or eliminate them to promote freer trade. The one-sided imposition of import tariffs is generally followed by tit for tat retaliation – so everyone ends up worse off as trade flows are disrupted and costs increased.
The overall impact of tariffs is to increase the retail price of goods for consumers in the importing countries, as importers, processors and/or retailers simply pass on the additional cost of imports down the chain. If that is not possible because of consumer resistance, then consumption falls, and profitability within the chain is eroded. This is true for food as it is for other goods – but food has a particular resonance when it affects consumers most visibly in their pockets. While they can postpone replacing their mobile phone for a year or two without major inconvenience, they need to eat three times a day.
Aggressive trade policy moves provoke official responses and popular protests
Trade flows can be altered by the announcement, as well as the real implementation of import tariffs or other non-tariff measures (e.g. different standards).
The EU has announced it would implement retaliatory tariffs in response to Trump’s announcement of 25% tariffs, with Trump in recent days advising that he would implement 200% “megatariffs” on EU wine and alcohol imports. A pointless, mutually damaging spiral, but this is what trade wars look like.
Quite apart from official retaliations from governments, aggressive trade policy moves can provoke popular outrage, reactions and boycotts which, in themselves, have an impact on trade flows.
Hence, the announcement by the Trump administration that tariffs would apply to Canadian goods (and that Canada may become the fifty first state of the Union!) has led to noticeable (early) trends in Canadian consumers’ behaviour. Well followed Facebook groups encouraging Canadians to read food product labels more carefully for provenance, boycott US foods and “Buy Canadian”. Canadian tourists, worth USD20.5bn to the US economy, are re-directing their plans to other destinations. US tourism industry sources have pointed to a reduction in Canadian demand for January and February of 8% for Niagara Falls hotels, and 12% for the Bellingham are in Northern Washington State, just across the border from Vancouver.
A profoundly unscientific survey of international Nuffield Scholars at the 2025 Contemporary Scholars’ Conference hosted by Nuffield New Zealand in Auckland earlier this month show that Trump’s erratic trade policy and acquisitive territorial announcements have not endeared the US to the global agrifood community!
The end of the golden era of stable global trade
Deputy Secretary of the NZ Foreign Affairs and Trade Ministry, Vangelis Vitalis addressed the Nuffield event. While it was recorded at a NZ beef and lamb event in 2023, the speech he gave here makes the points he presented. A long-standing trade negotiator for New Zealand and a WTO veteran, he stated that the golden era of stable global trade, which had arisen from the firm inclusion of agrifood policy in WTO from 1995, started petering out from around 2010/2015. More protectionism and national retrenchment, less certainty, fewer multilateral trade agreements through WTO, more bilateral deals, more trade wars. The only significant impact from WTO since 2015 – which happened in 2015 – was the agreement by all member countries to eliminate export subsidies to even the playing field.
New Zealand has been more successful than most in challenging various unfair trading measures through the WTO process – the only WTO member to have taken more than four cases and never have lost one. Vangelis pointed out there has been little to nothing positive in global trade terms coming from WTO since.
In this context, NZ’s strategy, is to recognise the reality of uncertainty and volatility in global trade and make alliances with like-minded small nations to impact the situation and optimise bilateral or multilateral trade deals, such as the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership).
For Ireland, which just like New Zealand is a small, open economy strongly dedicated to food exports, being firmly part of the EU block when it comes to trade negotiations means this is not an option.
Instability and impact on agricultural prices
We are living through exceedingly turbulent times, and too many countries’ gung-ho or protectionist trade policies, regional geopolitical unrest and wars are hampering stable trading conditions.
Added to that, climate change is not only impacting on-farm production conditions and costs, it is also disrupting trade with, for example, insufficiently high water levels in the Panama or Suez Canals resulting in slower, or at times, non-existent, ability to transit through these crucial trade routes.
War and strife in the Middle East, especially Palestine and Lebanon, have also led to guerilla activity impeding some of the trade through the Suez canal.
Commodity prices have benefited from a positive imbalance between supply and demand for many of agricultural products in recent months, and have translated into welcome improvements in farm prices, coinciding in many cases with easing costs.
But trade instability is bad for food prices in the medium and long terms. There are very good reasons to be concerned as to its impact on food availability and affordability for consumers all over the world, and on what this might do to agricultural prices in the medium term at least.
Further insights
Just as I was finishing this newsletter, I listened to the New Yorker Radio Hour interview of Stephen Kotkin, an expert on Russia, in which he analyses the new world order in which “strong men” dictatorial figures like Trump, Putin, Xi Jinping and others are redefining the world order – and with it how global trade may evolve over the coming years. A really worthwhile listen for further insights!
© Catherine Lascurettes, Cúl Dara Consultancy
