Irish exporters likely to face baseline US tariffs higher than 10pc, says Barclays
Given that Mr Trump appears to have rejected the current draft US-EU deal, which would have kept the tariff rate at the current 10pc and exempted some goods such as aircraft, European businesses need to brace themselves for a higher rate, Barclays has warned.
'While we do not foreclose the possibility that the US and EU can still reach a provisional agreement by August 1 that maintains the average tariff on most EU goods at 10pc, we think it may be more likely than not that the tariff on the EU increases from 10pc, but short of 30pc,' it says.
'We also expect more sectoral tariffs to be announced, which could cover a largefraction of EU exports to the US.'
As Mr Trump has been preparing tariffs of 15pc to 20pc on other countries, Barclays says this 'suggests to us that it may be more likely' he will fix on a number in this range for the EU as well.
Many Irish businesses are already 'materially hurting' from the current regime of 10pc, according to Ibec. Fergal O'Brien, a director at the lobby group, said low-margin businesses were particularly affected, and also hit by the weakness of the dollar.
'The 10pc tariffs is layered on top of the existing tariffs, and particularly in the case of the food and dairy industry, those are quite chunky,' he said.
'The most tangible impact has been in the drinks sector.
'We still have close to 90pc of distillery capacity mothballed at the moment.'
Mr O'Brien said that following the announcement of a 20pc 'reciprocal' tariff by Mr Trump on April 2, the so-called Liberation Day, some firms in the life-sciences sector considered putting staff on immediate short-term work after having contracts in the US cancelled.
'If you go to 30pc, that would raise a lot more issues in terms of the ongoing viability of supply from Ireland, or Irish companies continuing to sell into the US. We think 30pc, if that did transpire, which we don't think it will, would be extremely damaging.'
Markets largely shrugged yesterday in response to Mr Trump's threat on Saturday, when he also threatened Mexico with a 30pc tariff from August 1.
The Iseq in Dublin finished down almost 1pc on the day, with the stocks usually most reactive to tariff announcements disproportionately affected.
Ryanair was down 1.6pc, similar to AIB, while Bank of Ireland was down 1.36pc. Also down was the Kingspan group, whose share price fell by 1.46pc.
The biggest fall was experienced by Uniphar, down 1.7pc.
Other European stocks also slipped in early trading, but recovered most of their losses by the end of the day. The Cac in France fell by just 0.2pc overall, while the Dax in Germany closed only 0.4pc lower, having been 1.2pc down earlier.
The overall Stoxx Europe 600 index, which includes some non-EU markets, was only 0.1pc down on the day. By contrast, the FTSE index gained 0.6pc.
The UK has an outline trade deal in place with the US, with a baseline 10pc tariff, leaving it largely immune from fluctuations in Mr Trump's trade policy.
US stock indexes had even risen slightly by lunchtime, reflecting the fact many investors think Mr Trump won't ultimately follow through on his threats.
The euro also remained unchanged against the dollar.
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