Studying abroad in London has made it impossible to go a day without either talking about or hearing someone else talk about Brexit and its impending doom. Given that I’m on the Economics and Finance track, there is no escape from discussing Brexit and its impact not only on Britain but also on the rest of the world. Hence, I can confidently say that I’m well-versed with the ins and outs of Brexit. However, even though pretty much every college student knows of Brexit, not everyone quite understands the impact of this decision. Here’s a headline that made this situation a lot more relatable to me: “Mars bars face sharp price hikes without good trade deals.”
I’ve spent the better half of this semester analyzing the effect of Brexit on regulations and tariff increases in the financial sector. In this time, I completely neglected the adverse effect that Brexit will have on the food industry, too. To put it simply, the United Kingdom has several trading options, one of which includes trading with the European Union by following World Trade Organization rules. This comprises of a “hard” Brexit, which is just about as bad as it sounds. In the context of Mars bars, the company warned that a “hard” Brexit would result in higher costs, due to the 30 percent tariff rate. To date, the UK enjoyed free movement of goods and services without having to pay any taxes or quotas, and hence Mars was able to import a lot of its ingredients from countries, like France and Germany, located within the EU. With a 30 percent tariff rate, the cost of making a Mars bar will rapidly increase.
While it would be naïve to believe that, that’s an issue for the manufacturer to handle. Since these confectionary companies will not be able to intake the costs into their finances, they are likely to impost the cost of tariffs on the consumers instead, in the form of higher prices. Oh, and it doesn’t stop at chocolates. World Trade Organization rules impose similar taxes on meats, cereals and fruits. If you aren’t concerned about the economic repercussions of Brexit, these rising prices on popular food items make Brexit a more personal attack.
Certainly, the issue goes beyond just dishing out a few extra bucks for junk food. Unavoidable costs in the form of these tariffs is bound to result in fewer job cuts, salary and wage reductions, and economic turmoil. Although the detrimental effects of Brexit are already visible, it is a little reassuring to know that we still have a two-year leeway before Brexit becomes official. Until then, let’s hope that Prime Minister Theresa May negotiates for a “soft” Brexit (with preferential tariff rates), at the very least, for the sake of everyone’s sweet tooth.