With Donald Trump’s EU tariffs coming down the track, Paul Merriman, founder of AskPaul and CEO of Fairstone Ireland, breaks down what this could mean for Irish businesses as well as how Irish businesses can prepare.
Irish businesses could face significant challenges as President Trump has warned that he will “impose” tariffs on the European Union.
In just the first six months of 2024, Ireland exported over €39bn euros worth of goods to the USA, compared to imports of just €13bn.
The USA is Ireland's single most important country to export goods to, with exportations just below those to the rest of the EU.
This move could cause devastating economic consequences for the Irish economy.
Tariffs have been at the top of President Trump's priority in his ‘America First’ campaign, way before he took his seat in office.
On February 4th he implemented a 10% tariff on all Chinese goods, he has also threatened to put a 25% tariff on goods from Mexico and Canada, although this has been postponed for a month.
If the President follows through with these threats all Irish businesses trading with the USA will be impacted, however, those who trade in pharmaceuticals and chemicals will see the most notable change as Trump has stated he wants to push manufacturing back on to U.S. soil.
The Impact on Irish Businesses
- Higher Costs and Reduced Profit Margins
Tariffs will act as a direct tax on goods exported to the USA, forcing businesses to either absorb the extra costs or pass them onto their customers.
While larger corporations might be able to bear the costs, SMEs often operate on tighter profit margins, meaning even a small increase on tariffs can impact their bottom line significantly.
- Declining Sales From the U.S.
Irish Businesses might see a reduction of orders from their U.S. customers, as there will be a real push for Americans to buy from within the country, as well as some U.S. consumers turning to non EU suppliers.
- Difficulty Expanding into the U.S.
It might become harder to secure U.S. distribution deals as importers may hesitate to take on additional costs, this can fundamentally impact the growth of Irish Businesses from trading in international markets.
- Supply Chain Disruptions
To compensate for the tariffs, businesses may be forced to find alternative, less desirable, suppliers for their products.
This can reduce product quality and leave customers frustrated with the brand.
There could also be longer delivery times and production slowdowns as companies try to navigate the new imposed tariffs.
How Businesses Can Prepare
In response to the potential tariffs, Irish companies should take proactive steps to assess the potential impact this can have on their business.
Preparing now can help businesses safeguard their profitability and maintain some sort of stability in uncertain times.
Companies should not wait until the tariffs are officially in place to react, instead steps can be taken to put your business in a much stronger position should these tariffs come into fruition.
- Asses Potential Impact
Businesses should identify which of their products could likely be affected by these tariffs.
Which products will have a direct impact? How is this going to affect your profit margins and overall revenue?
Would U.S. consumers still buy your products at a higher price or would they seek alternatives?
- Explore Different Markets
Why not explore new potential trade partners, expanding into markets like Canada, Australia and Asia could reduce your dependency on the U.S.
Take this as an opportunity to strengthen your EU relationships, are you taking full advantage of your EU customers.
- Strengthen Supply Chains
Try and negotiate with your current supply chains to get a better deal before the tariffs take effect, this could reduce the impact the tariffs eventually have on your overhead costs.
You should also look into areas of your supply chain where you can reduce costs. Can you reduce waste?
Can you make the process more streamline? Have you explored automation within the business?
- Stay Informed
Make sure you are regularly checking government websites, the news and attending trade briefings and webinars for industry updates.
You want to make sure you are fully aware of any market changes within your industry.
- Seek Financial Advice
If you are struggling or unsure what this means for you, or you have general business queries, it is always best to seek advice from a professional.
Experts like those at askpaul, are able to guide you in the right direction and provide you with help on the next steps to take.
By taking proactive measures now, Irish businesses can reduce the impact U.S. tariffs could have on their business and strengthen long term trading resilience.
Photo: US President Donald Trump in the Oval Office of the White House. Photographer: Aaron Schwartz/CNP/Bloomberg via Getty Images
