As markets roil amid a trade war triggered by President Trump, agrifoodtech investors say portfolio companies should reassess their business models, with some better placed than others to weather the storm as issues such as food security move into sharper focus.
PeakBridge founding general partner Nadav Berger told AgFunderNews: “This isn’t just about tariffs but about the greater global economy, and on that front the macroeconomic implications are still far from clear.”
Foodtech companies based outside the US will need to “reevaluate their ability to be competitive in the US market, based not just on tariffs but also on regulation, which is still unclear,” he noted.
“The food industry traditionally has small margins, which doesn’t allow for swapping ingredients at a premium. Tariffs on ingredients, for example, can have a significant and immediate effect on a company’s ability to reach price parity. So successful companies across the sector will need to assess their business models to ensure such a target is still realistic.”
Stepping back, he said, this trade war “is another major blow to the already cracking global supply chain.”
However, like COVID-19, it will “make food security an urgent priority for many more countries even faster than previously thought,” he noted, which could present opportunities for some food startups. “Foodtech is in many ways about reforming the flawed supply chain, and in that sense the startups who play their cards right have an opportunity here to truly be part of the future food system.”
‘Domestic biomanufacturing is essential’
Liberation Labs, which is building a biomanufacturing facility in Richmond, Indiana, for example, is better-placed than many to weather the storm, predicted CEO Mark Warner.
“As destabilizing as the tariffs appear to be for many, we are very fortunate to be shielded from much of their impact. In fact, some could argue that it reinforces our core thesis that domestic biomanufacturing is essential,” he told us.
And while biomanufacturing equipment is often sourced from overseas markets such as Germany, China or India, Liberation Labs has already secured “the majority of its steel and long-lead equipment,” he said. “We have minimal exposure to construction cost increases or schedule delays.”
He added: “The majority of our forward operating inputs—feedstocks, utilities, and key raw materials—are sourced domestically, shielding us from the cost and supply risk others now face.
“And perhaps most importantly: our customers are noticing. We’re seeing a significant uptick in inbound interest and early commercial commitments, with demand accelerating for our first years of production.”
‘It’s becoming toxic to plan long-term business here’
For US-based emerging CPG brands, however, a trade war could be grim, said consultant Dr. James Richardson (author of Ramping Your Brand).
“Like the entire world, early-stage brands do not have clarity on how permanent these tariffs really are, so some early-stage brands are planning to push through price increases but executing first online because it’s low friction to do so, and reversing is also easier,” he told AgFunderNews.
He added: “Brands will most likely ask for double-digit retail SRP [suggested retail price] increases at annual sales meetings with buyers—and push them through with distributors—to protect margins and survive. This is more challenging if brand velocities are stagnant already, so some brands will lose accounts. Weaker brands will likely die off quickly, if retail buyers prefer to replace and capture new slotting fees.”
Some multi-national early-stage ventures, meanwhile, “are likely to pull out of the US entirely if the US is a minority of their business,” he predicted. “It’s becoming toxic to plan long-term business here.
Canadian businesses with the majority of revenue in the US are “in the worst position,” he said. “Larger private Canadian brands may choose to relocate manufacturing next year if tariffs last, but smaller ones will need to count on pushing through price increases in the US to survive or simply retract.”
Hedging may delay impact for some
As for the nation’s largest food and beverage companies, the impact of a trade war will depend on their exposure to markets with the highest tariffs, said analysts at TD Cowen in a note on April 4.
Large drinks companies such as Diageo, which produces a large number of products overseas that are sold into the US market, could be hit hard, predicted TD Cowen. “About 40% of the company’s US sales are from products produced outside of the US, namely Guinness (Ireland – 20% tariff), Captain Morgan (US Virgin Islands – 10% tariff), Johnnie Walker (Scotland – 10% tariff), Tanqueray (Scotland – 10% tariff), Ketel One (Netherlands – 20% tariff), Baileys (Ireland – 20% tariff), and Cîroc (France – 20% tariff).”
In some cases, food procurement teams may have contingency plans in place with alternative suppliers lined up domestically or in markets with lower tariffs. But in other cases (cocoa from West Africa, high intensity sweeteners from China), manufacturers will have to take the hit, said TD Cowen.
That said, larger companies will be shielded from some of the impacts in the short term, it noted: “Due to hedging cycles [for cocoa] of typically 12 months, we would not expect an impact on US chocolate producers’ P&Ls until 2026.”
‘Supply chains hate uncertainty’
Matt Lekstutis at global procurement and supply chain consultancy Efficio told us: “Generally speaking, supply chains hate uncertainty, and the level of uncertainty has been ratcheted up to epic proportions.
“While most companies have been evaluating and preparing for tariffs over the past months, since the tariffs of 2017 for that matter, as evidenced by the stock market impact we have seen since the Liberation Day announcements, few had expected the magnitude of what was unveiled.
“This has many companies scrambling to evaluate new scenarios… It is not a simple matter though, because there are so many uncertainties, and you have to look not just at your direct suppliers but at the second and third tier to really get a clear picture of the exposures. And to make things more complex, you have to look outside your own industry for adjacent impacts like CPG firms being impacted by the automotive industry shifting their supply chains and disrupting and raising costs to CPG companies of products like packaging, IOT devices and shared shipping lanes.”
‘Expect valuations to decline’
At early-stage investor Fifty Years, founding partner Seth Bannon shared an email he had sent to portfolio companies two weeks ago via a LinkedIn post urging founders to:
- If possible, get to 18 to 24 months of cash on hand to weather potential market downturns, review salaries.
- Consider temporary hiring reductions or freezes to preserve cash.
- Cut non-essential or discretionary spending.
- If fundraising is underway, close promptly.
- Expect valuations to decline. Prepare to accept additional capital under potentially less favorable terms. If you have the ability to raise more capital, opt to take more cash.
- Accelerate your path to profitability to reduce dependency on external capital.
- Model costs for non-domestic parts and raw materials increasing by 20-50%. How can you make your economics work?
- Evaluate your supply chain dependencies and explore alternative sources to mitigate risks associated with tariffs and trade disruptions.
If you rely on government grants, meanwhile, “evaluate the likelihood that these will be canceled or substantially reduced,” he added.
“Economic indicators are showing signs of significant instability. Rapid policy shifts under the current administration like tariffs, cuts to science funding, infrastructure, clean energy funding and more have introduced recurring uncertainty into the market.
“In our experience, the best founders respond proactively to such signals by making difficult decisions early rather than delaying to effectively position for the emerging new normal.”
‘Disruption often creates new openings’
Dan Y Altschuler, managing partner at Unovis Asset Management told us: “Tariffs will probably make life harder for US-based early-stage companies in our portfolio that are still working to build trust with consumers. Startups run lean, so even modest increases in costs can have an outsized impact.
“Consumers will probably feel it, too, and the uncertainty makes long-term planning even more challenging.”
That said, he added, “Disruption often creates new openings. Some of our international companies may find fresh opportunities in new markets given the changes that are happening.”
‘Ag spraying drones still represent a fantastic ROI for farmers, even with tariffs’
For US ag spray drones companies that have struggled to compete with Chinese-made products, significant levies on imports from China could provide a boost, depending on the extent to which they rely on Chinese-made parts.
For US-based distributors of Chinese spray drones, however, escalating tariffs are clearly going to make life more challenging, Bryan Sanders, president at full-service industrial drone company HSE-UAV , told AgFunderNews.
“Currently, there simply aren’t any viable US-made drone options available that can compete with overseas manufacturers in terms of features, capabilities, or price.”
But he added: “Ag spraying drones still represent a fantastic ROI for farmers, even with tariffs. The massive cost savings and efficiency gains these drones provide can help offset increased expenses in other areas, making investing in drone technology one of the smartest moves a farmer can make right now.
“While there’s an upfront cost, the reduced chemical usage, lower labor expenses, and increased yields contribute to ongoing savings that really add up.”
NFU: American farmers will bear brunt of global trade war
One thing is certain, however, “American family farmers and ranchers will bear the brunt of this global trade war,” claimed National Farmers Union president Rob Larew.
In a statement. released late last week, he said: “The economic strain and uncertainty that farmers face have reached a breaking point. Without meaningful support and a commitment to fair trade policies, we will lose even more family farms, weaken rural economies, and ultimately drive up costs and limit choices for consumers at the grocery store.”
Farmers rely on stable markets and fair competition to thrive, he said, “But the administration’s actions create instability at the expense of our family farmers. Policymakers must recognize that the consequences of these decisions extend far beyond the farm—our entire food system and the communities it sustains are at stake.”
In a letter sent to the USDA secretary Brooke Rollins and other Trump administration officials, the NFU and multiple other agricultural organizations added: “More than 20% of US farm income is based on agricultural exports, and it is much higher for many commodities… We support the administration’s goal of increasing domestic security and ensuring fair trade with other nations, but additional tariffs on these nations’ imports run the risk of significant retaliatory measures against US agricultural exports, which have already been implemented by Canada and China.”
USDA secretary: Trump is ‘ultimate deal maker’
USDA secretary Brooke Rollins acknowledged farmers’ concerns in an interview on CNN’s ‘State of the Union’ show over the weekend, but implied that the tariffs were being used as negotiating tools, with scores of countries “burning the phone lines” in response. Trump, she added, “is the ultimate deal maker who is a businessman at the head of our government.”
Her comments came as the Chinese government imposed a 34% tariff on all imports from the US, beginning April 10, to which Trump has responded by threatening an additional 50% tariff on Chinese goods entering the US.
ASA: Tariffs will cause long-term damage to US soybean farmers
Should the trade war with China persist, US soybean farmers are likely to be hit especially hard, having already lost ground to Brazil during the first Trump administration, said the American Soybean Association in a statement late last week.
“Agriculture needs a strong Phase Two agreement [with China] that addresses US trade concerns and avoids a prolonged trade war. Soy farmers still suffer from negative impacts of lost market share, reputational damage, and expanded production in competitor countries stemming from China’s trade retaliation in 2018-2019 before the Phase One agreement was reached.”
American Farm Bureau Federation president Zippy Duvall added: “Increased tariffs threaten the economic sustainability of farmers who have lost money on most major crops for the past three years.
“More than 20% of farm income comes from exports, and farmers rely on imports for crucial supplies like fertilizer and specialized tools. Tariffs will drive up the cost of critical supplies, and retaliatory tariffs will make American-grown products more expensive globally. The combination not only threatens farmers’ competitiveness in the short-term, but it may cause long-term damage by leading to losses in market share.”
Following lobbying from farming groups, the Trump administration has excluded veterinary vaccines, several pesticide ingredients, fertilizers containing potash, peat, lubricating oils and greases, and other energy products, from tariffs, noted the AFBF.
However, overall, farmers and ranchers, “will be paying more for many of the products they purchase, from seed for vegetable growers to tractors and other equipment made of steel,” it added.
Further reading:
More pain to come? Agrifoodtech investors brace for a tumultuous 2025
