Business Personal Finance

Thursday 13 December 2018

Trade war hits supermarkets here with hikes in products from the US

Stock image
Stock image
John Mulligan

John Mulligan

Consumers are facing a sharp jump in price on products including orange juice, bourbon and cranberries before the summer is out, amid Donald Trump's trade war.

Brussels has slapped a 25pc tariff on a host of American products in response to the US president's tariffs on aluminium and steel.

Jack Daniel's bourbon is among the leading brands affected, and fresh orange juice such as Tropicana could also be hit. Groceries here are already among the dearest in Europe.

The trade war - which some economists believe could spark a global recession - will hit consumers' pockets as tariffs come into effect on orange juice, bourbon, cranberry juice, peanut butter, cosmetics and jeans imported to the European Union from the United States.

With Ireland already having the third-highest prices for goods and services in the EU, the tariffs are likely to have a disproportionate impact on shoppers here.

Food prices here are 17pc higher than the EU average, according to Eurostat, the European Commission's official statistics unit.

US whiskey maker Jack Daniel's, whose bourbon exports to the EU now attract a 25pc levy, said yesterday it is raising the price of the drink in the EU over the next two months by about 10pc.

Other products from the US, including sweetcorn and maize, are also subject to the new tariffs and have been hit with a 25pc levy.

"I think it will be between two to three months when we see the impact filter through," said Jim Barry, the managing director of the Cork-based Barry Group, which controls the Costcutter franchise and distributes to more than 1,000 customers, including more than 265 franchisees.

He added that suppliers won't be able to absorb such hefty price increases, meaning consumers will soon see the impact of the global trade battle on the shelves of their local shops.

"I think we'd have to explore our options," he said, when asked if the company would seek to secure similar products from outside the United States.

Brazil, for example, is the world's biggest producer of orange juice.

US-based Tropicana, owned by PepsiCo, does source oranges from Brazil - but says it strives to use as many Florida oranges as possible to make its juice.

If it wants to avoid the tariffs in Europe, it will have to ensure its orange juice products packed in the EU are only using juice imported directly from Brazilian orange groves.

Mr Barry said consumers would not want to pay substantially more for products hit by the tariffs, but he stressed the number of items on Irish supermarket shelves from the US is extremely low, with most goods being imported from within the EU. But dozens of consumer goods aside from groceries have been hit. Wireless controllers for games systems attract a 50pc levy, while electronic readers - such as Kindles - imported from the US are also subject to a 50pc tariff.

Lorraine Higgins, the chief executive of Retail Excellence Ireland, said the new tariffs could provide an opportunity for some Irish companies involved in cosmetics or fashion, for instance.

The European Commission has also warned the trade war between the US and the rest of the world is likely to worsen in coming months. The world will revert "to a trading environment where rules are only enforced where convenient and where strength replaces rules as the basis for trade relations", according to a memo drafted by the commission.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business