The 2024 election has brought about considerable potential for policy shifts in the food & beverage industry… with many businesses left asking, “What’s changing, and how should we react?”
Below, Pinion’s government and public affairs team has evaluated the four most likely areas to have impacts for food and beverage manufacturers in 2025: tax, trade, health and human services, and labor and immigration. Let’s explore what the potential changes could look like in each area, as well as preparations food and beverage companies should implement now.
-
Tax Policy Outlook
If extended, the Tax Cuts and Jobs Act (TCJA) could continue to benefit the food and ag sector. Many of the favorable provisions, like the Qualified Business Income (QBI) deduction, are due to expire by the end of 2025, but there is a strong push, particularly by Republicans, to extend these cuts.
This could mean further reductions in corporate tax rates and other financial benefits which would generally support growth and investment in the sector. However, there is also a looming concern about the impact on the national debt and potential offsetting tax increases.
Particularly relevant to U.S. food & beverage manufacturers is the potential amendment in the amortization requirements for R&D expenses under the TCJA. Currently, companies must spread these expenses over five years, which may strain cash flows and impede investment in innovation. There is bipartisan support for reinstating immediate expensing for R&D, which could greatly benefit the industry by fostering more rapid innovation and product development.
Pinion Pro Tip: Stay in communication with your tax advisor and remain agile to capitalize on potential tax incentives while preparing for broader fiscal impacts that could affect operations.
-
Trade Policy Outlook
Trade policy under the new administration could see tumultuous changes, especially with President Trump’s indication towards implementing aggressive tariffs on imports from major agricultural trading partners such as Mexico, Canada, and China. These tariffs could increase the cost of imported inputs for food & beverage manufacturers, from ingredients to packaging materials. Trump’s interest in renegotiating the US-Mexico-Canada Agreement (USMCA) adds to this uncertainty.
Pinion Pro Tip: Food & beverage manufacturers need to prepare for volatile trade conditions by considering alternative sourcing strategies and adjusting procurement approaches, as needed.
-
Health and Human Services (HHS) Outlook
Robert F. Kennedy Jr.’s potential appointment as head of HHS poses an interesting dynamic for the Food & Drug Administration’s (FDA’s) oversight of the food industry. Kennedy has been openly critical of the FDA, advocating for a new era of ingredient scrutiny, with a focus on “clean” products, free of artificial additives and food dyes. His approach could lead to significant regulatory changes that might affect everything from product formulations to labeling requirements. Watch these developments closely as they could have far-reaching implications for supply chains and product development.
“Many in the food and beverage industry would welcome more scrutiny of ingredients, but reduced shelf lives could have far-reaching impacts throughout the supply chain. Additionally, it remains to be seen how Kennedy’s apparent conflicting interests in stricter ingredient oversight and FDA deregulation will align.”
Pinion Pro Tip: It’s crucial for food & beverage companies to actively engage with regulatory processes to maintain compliance and leverage competitive advantages in product safety and quality.
-
Labor and Immigration Outlook
The industry’s reliance on immigrant labor, especially through the H-2A visa program, makes it particularly vulnerable to changes in immigration policy. President Trump’s proposals for mass deportations and reductions in legal immigration, coupled with the appointment of figures like Tom Homan, who has a history of enforcing stringent immigration controls, could disrupt the availability of crucial labor resources.
Pinion Pro Tip: Manage increased costs by enhancing budget forecasting and seek expertise in navigating H2A visa requirements to secure essential labor efficiently.
Stay Informed
The one certainty right now: New governmental priorities and initiatives are ahead and this will entail changes for the food and beverage industry. It is important to stay informed and flexible to navigate the evolving political landscape’s challenges and capture its opportunities.
