From Irish whiskey to Italian cheese, U.S. tariffs rattle EU exporters
The founder and director of Skellig Six18 Distillery, June O’Connell, expressed that U.S. tariffs have negatively impacted her business. Skellig Six18, located on the west coast of Ireland, produces gin and whiskey, with the first products being introduced to the U.S. market in early 2024 after a lengthy negotiation process with distributors and retailers. However, the imposition of tariffs by the Trump administration has led to uncertainty and challenges for businesses of all sizes.
President Trump’s recent announcement of a 30% blanket tariff rate on the EU has created further uncertainty, with negotiations failing to produce a framework deal. The EU’s food and drink trade with the U.S. is substantial, and any escalation in tariffs would have a significant impact on European producers and farmers while driving up costs for U.S. consumers.
For businesses like Skellig Six18 and French distillery Combier, the tariffs have already had a noticeable effect on pricing and sales. The potential for a 30% tariff, combined with currency market fluctuations, could further impact consumer prices and sales to the U.S. market. Businesses are now facing challenges in navigating the uncertainty created by the tariffs and are trying to mitigate the impact on their operations.
Impact on Prices and Supply Chain
There is concern in the business community about the impact of tariffs on wholesale and retail prices, with worries that this could lead to a decrease in sales volumes,” a spokesperson stated.
Some businesses are exploring new supply chain options to offset the effects of tariffs. For example, EU manufacturers are considering relocating their assembly lines to the U.K. to leverage its existing 10% agreement. However, they must navigate the complexities of “rules of origin” to determine the product’s source for tax purposes.
One example is a German kitchen appliance manufacturer that sources materials from Asia and imports them into the EU at a low tariff rate. By shifting the final assembly process to the U.K., the company can benefit from a 10% tariff when exporting to the U.S., instead of a potential 30%.
Meanwhile, larger corporations are contemplating moving some manufacturing operations to the U.S. Siemens and Bosch are among the companies looking to localize manufacturing to expand their North America business.
For businesses like Skellig Six18, relocating production is not an option for “origin protected” items such as Irish whiskey. Instead, they are exploring new markets in Asia, Africa, and Latin America. However, entering these markets can be challenging due to the lack of existing whiskey sales.
Franck Choisne from Combier distillery highlighted the resource-intensive and time-consuming nature of establishing a presence in new markets. Despite the challenges, businesses are focusing on what they can control and adapting to the changing landscape.
Contributions to this story were made by CNBC’s Sam Meredith.
