John Whelan: Businesses search for a way forward after tariff cluster bomb
Regardless of the many manoeuvres businesses try, there will inevitably be added costs and likely US customer losses. Picture: Dan Linehan
The global tariff announcement caps a tumultuous two-and-a-half months since Donald Trump’s return to the White House. The tariff cluster bomb released in the Rose Garden hits friends and foes in different measures.
The UK managed to avoid the higher 20% tariff levied on all EU goods geared for sale to the US. The lower 10% tariff will certainly give a boost to UK companies, making it a key transit destination for many Irish-based and EU companies who have subsidiaries there and may be able to avail of the lower tariff.
Fortunately, the worry that pharmaceutical companies would be singled out for additional special tariffs did not come to pass. The sector will be looking at its many plants across the US, Ireland and the UK to maximise tariff avoidance. Companies such as Novartis, Astra Zeneca and Glaxo Smith Klein, with plants in the UK and Ireland, may opt to export more to the US from their UK plants, getting the Irish plants to supply more across Europe, Africa and the Middle East.
For business executives in general, the Trump global tariff board brings some clarity, as they now have a template around which they can organise their business operations for 2025. Of course, they will still have to watch the political responses from countries around the globe.
The new business template for companies selling to the US will, of necessity, have to be multipronged.Â
Where it makes sense to locate manufacturing in the US and get inside the tariff wall, companies will do so, such as Johnson & Johnson's recent $55bn (€50.9bn) investment and Eli Lilly’s $27bn (€25bn) plan for new US manufacturing plants. But this takes time, and the availability of highly skilled staff may take years to achieve.
Where the company is a major importer into the US, many will follow the largest retailer, Walmart and their plan with Chinese manufacturers to force suppliers to reduce their prices to cover the tariff.
For many other US importers who worry about losing market share, such as Nike, absorbing the tariffs and struggling on with lower margins is the option they have already decided on.
Combilift, the Irish global leader in multi-directional forklift manufacturing, based in Monaghan, with extensive sales in the US, have opted to offer a 12-month fixed guaranteed selling price at the point of entry into the US. This gives their US customers certainty on the buying price from Ireland but leaves the US importers to pay any tariffs due, according to their CEO Martin Mc Vicar.
However, regardless of the many manoeuvres businesses try, hoping to protect their market share, retain their customers and their profit margins, there will inevitably be added costs and likely US customer losses.
Some sectors will take a full hit. The IFA and EU farming organisations sounded the alarm on Wednesday night.
Eoin Ó Catháin, director of the Irish Whiskey Association, said that “the effects of this tariff will be immediate’’, adding, “Should an appropriate resolution not be found, this tariff may have a detrimental effect on the position of the category in the US market, undoing decades of success and growth. ’The US has been the engine of growth for Irish whiskey and spirits and now represents 41% of Irish drinks exports every year.
Ursula von der Leyen said that the EU is “preparing further countermeasures” to protect its interests.
The measured tone of the EU responses to date will be very much in line with Taoiseach Micheal Martin's stance.
The Commission said on Wednesday it would retaliate against the earlier US tariff of 25% on steel and aluminium imports from the EU on April 13 and issue a joint response to the automobile and other tariffs at a later date.
Brussels, however, said its “priority” is to negotiate an agreement with Washington to “avoid the inevitable pain” that tariffs would inflict on both the US and EU economies.
