We have a clearer idea of how the EU is responding to Donald Trump’s tariffs now, do we?
Well, we did. On Wednesday afternoon the European Commission announced plans to impose counter-tariffs of between 10 and 25 per cent on close to 2,000 categories of US products, with the impact staggered between now and the end of the year. But then the US President Donald Trump surprised the world by announcing a pause in higher reciprocal tariffs. The EU was set to be hit with tariffs of 20 per cent but may pay a baseline of half that for 90 days. Duties on China climbed to 125 per cent. It remains to be seen how the EU will respond to the latest move.
If the EUs tariffs go ahead what products will be impacted?
The list is very, very long and covers everything from machine parts and manufacturing equipment to niche crafting products and diamonds and things commonly found on Irish supermarket shelves.
Sounds random.
It represents a “careful mix” of products drafted with an eye to the potential for a targeted US backlash against sectors of the EU economy, according to one EU diplomat.
Can you give me a flavour of what is on the list?
In the first instance, goods such as cranberries, cranberry juices, oranges and orange juices were due to be hit with 25 per cent tariffs, kicking in on April 15th. On May 16th, a 25 per cent tariff was planned to hit a second batch of products including steel, meat, certain chocolates and hundreds of other products. And from December 1st, tariffs could be imposed on nuts, soybeans and more.
Trump’s tariffs: “The rest of the world is now going to de-risk from the United States”
I’ve heard US yachts and motor boats will be taxed but that won’t affect me. What will?
Certain products are niche for sure but many things that might be impacted will be commonly found in Irish shops and Irish homes. Sweetcorn, tobacco products, essential oils, make-up and hair products, wool, cotton, denim, shoes, ceramics, step ladders, electrical appliances, parts of electrical appliances, perfumes, flasks and carpets are just some of the things coming into Ireland from the US that are likely to be hit with higher tariffs.
And it is 25 per cent across the board?
No. Many products could see a 25 per cent duty imposed while others could see the tariff rate set at 10 per cent.
If a tariff of 25 per cent is imposed on my €100 perfume does that mean it will instantly jump in price to €125?
No. Tariffs are government-imposed duties on imported goods that are paid by businesses importing goods and not automatically by the end user. Once they’re imposed, companies will calculate whether they can pass them on in full to consumers or absorb them. Typically, what happens is the cost is spread along the supply chain, with companies, distributors, retailers and consumers all taking a hit.
[ Michael McDowell: Tariff war a major self-inflicted wound for the United StatesOpens in new window ]
So if a 25 per cent tariff is imposed on my US perfume how much will I pay?
The entirely speculative answer is between 5 and 10 per cent.
What else is likely to happen?
The situation is fluid as the US president’s Wednesday evening announcement showed. A week ago some market analysts were suggesting that tariff-induced inflation might put the brakes on rate cuts but now the mood music has shifted and fears of recession trump – if that is not the wrong word – fears of inflation. The US will probably suffer an “inflationary shock”, but economists in Europe are confident the disinflation trend is “solid” while the euro’s rise since Trump announced his tariffs will help contain upward price pressures.
[ Grocery price inflation surges to more than 4.5%Opens in new window ]
What does that mean?
It means the European Central Bank is expected to cut its interest rates by a quarter of a point next week and follow it up with a similarly-sized rate cut in June. There could be four rate cuts between now and September, which would see the rate at which tens of thousands of Irish mortgages are priced falling to 1.65 per cent. It should also put downward pressure on variable rates and fixed rates in the future. However, it will negatively affect savers.
What about oil prices?
Oil always suffers when there is talk of recession and it has been taking a hammering on global markets ever since the US administration announced details of its global tariffs. Crude is priced at levels not seen since 2021. That should filter down to Irish forecourts by early May and will see petrol and diesel prices fall, perhaps considerably. It may also reverse a trend of higher domestic gas and electricity prices, although it is too early to say when that might happen. It certainly won’t happen in the short term as companies tend to buy months in advance and will have paid considerably higher prices for both electricity and gas than they would have paid if bought this week or last week.
