Tariff and Trade Volatility Demand Agility

In the past few months, announcements of new trade policies, tariffs, and agreements have come at a furious pace. Between the time I wrote this column and the time you read it, trade policy will certainly have changed. That’s the new reality of working with a very active and vocal federal government.

Each change impacts our supply chains. Some are obvious—like unexpected cost increases or the urgent need to reformulate products. And some are less visible—like suddenly canceled international orders when the price was set before the latest tariffs were in place or shipping delays as freighters wait for a full load of containers in an era of lower volumes or get held up at ports due to fewer inspectors.

All of that makes international supply chains suddenly less reliable—something we had a bitter taste of during COVID and a growing familiarity with due to climate change. Coming up with an answer for navigating rapidly changing supply chain challenges is tricky because changes are happening faster than our businesses can decide how to adjust.

Right now, trade policy and proclamations about changes in food and nutrition are converging in some important ways around ingredients like seed oils. Whether they are killing us or are helping us avoid trans fats, oils like canola oil, which comes mostly from Canada, will be more expensive thanks to tariffs. If your main concern is canola oil, the easiest switch could be soy and corn oil from crops grown in the United States. Soy and corn may be considered “seeds” by some, along with all beans and grains, but they may be in abundant supply with export markets for corn and soy for animal feed dwindling in the face of reciprocal tariffs.

Peanut oil offers another domestically grown alternative with a different set of health concerns. FDA Commissioner Martin Makary may be right in claiming peanut allergies are triggered by our fear and our response to allergens.

Fruit oils like olive and avocado are more expensive options, even before the impacts of tariffs or the whims of climate change, which is driving down supply.

Safflower and sunflower oil are U.S. domestic products and represent a simple shift for product formulators seeking to avoid tariffs—if not the wrath of nutrition influencers. These oils also may be abundant as export markets dwindle in the face of higher tariffs.

It could be a while until the federal government mandates reformulation of products that contain the kinds of unpronounceable food ingredients now under fire on both the consumer and regulatory fronts. Consumer pressure and coming labeling laws in California could accelerate the process, however. The move away from unpronounceable ingredients largely brings us more in alignment with European Union (EU) regulations, while exports to the EU will slow due to trade barriers. So, a quick, short-term fix is to simply sell the kinds of clean label products formulated for export to EU countries right here in the United States and skip substantial reformulation. Of course, getting new packaging is another story.

The ongoing trade wars may also create some opportunities. Consider the following scenarios:

• American Flavor Favorites. American crops and flavors may suddenly be more attractive as new CPG product flavors. (Think citrus, berries, apples, and pears.) This is because purchases and production are more closely linked to the harvest seasons.

• Bread in Abundance. The United States produces much more wheat than we consume domestically. Reduced exports mean lower wheat prices and higher supplies. That, coupled with the U.S. decision to end economic barriers to trade with Russia, which is historically the world’s largest wheat exporter, means that global supplies will rise, as well.

And that translates to lower wheat prices. So now is the time to quickly develop an expanded selection of savory products like calzones and to focus on encouraging consumers to add more bread to their mealtime menus.

• Snack Time. The same export dynamics for wheat also may affect corn and potatoes, where the United States has historically been a large exporter to Mexico and Canada. Ingredient prices should hold steady, and that’s a bright spot for expanding affordable offerings.

When change is the only constant, being nimble is critical. At least we’ve learned a thing or two about this from COVID, climate change, and other forces beyond our control, and applying those lessons will be important in the current climate of volatility.ft

The opinions expressed in Dialogue are those of the author.