From Irish whiskey to Italian cheese, US tariffs rattle EU exporters

Along the “final roads of Ireland” on the country’s sturdy west coast, O’Connell’s business Skellig sekellig 618 in June makes gin and whiskey.

According to O’Connell, America was a natural target market after the first spirit was ready to sell in 2019. As an independent supplier, negotiations with distributors, marketers and retailers took over a year, and her first product left Kelly in November 2023 for a US launch in early 2024.

The political tide then began to spin in the White House.

“When it became clear what direction things were heading, people were trying to get more product nation side than tariffs. We did some of that, but now the warehouse is filled. Importers say they’re not sending it anymore.

Since the beginning of the year, President Donald Trump’s unpredictable tariff announcements have shaken up businesses of all sizes.

In particular, the European Union has elicited Trump’s rage due to a trade surplus of 18 billion euros ($231 billion) in goods with the US

He argues that tariffs are necessary to create a more balanced relationship. However, EU officials argue that trade is more uniform beyond goods, services and investments, and have pledged to increase oil and gas purchases to narrow the gap.

Last weekend, Trump announced he plans to hit the EU with a blanket tariff rate of 30% from August 1st after last-minute negotiations failed to create a framework deal. Now there is a great deal of uncertainty over whether an agreement can be reached in the next two weeks, and the details and compromises that may be included.

The Trump administration has already imposed a 10% baseline obligation on EU imports, along with higher rates for cars and metals.

The fact that the UK’s trade agreement with the US maintains exemptions for some sectors and a baseline tariff of 10% has led many to believe this is Europe’s best hope. The Financial Times said on Friday that Trump has achieved more difficult boundaries in EU negotiations and is pushing for a 15-20% minimum tariff, with people explaining the talks. CNBC does not independently review the reports.

EU food and drink trade with the US is worth almost 30 billion euros, and trade group Fooddrinkeurope this week escalation of tariffs paid by importers clashes with European producers and farmers, increasing the choice and costs of US consumers.

Even the 10% US import duties imposed in April had been causing a blow to businesses, according to O’Connell of Skellig Six18. Adding supply chains will have a much higher impact on consumers.

“30% (customer duties) would not be acceptable when it comes to pricing. The overall situation definitely holds back your ambition,” she added.

For Frank Choice, president of French distillery Combier, the 10% tariff is nearly manageable. Founded in 1834, Combier is best known for creating liqueur triple sections used in margarita cocktails. The US accounts for approximately 25% of total sales.

However, Choisne points out that the 10% tariff is above the hit from the currency market. The weaker US dollar this year has made it even more expensive for the US to import foreign goods.

He said the 30% tariff and exchange rate impact means that the overall rate of 45-50% will be reflected in the final consumer price.

“President Trump understands that he is improving the balance between imports and exports, but at that 30% level, of course, the EU will respond, trade will be hit and a loss,” he said.

US exporters of products such as bourbon will also suffer, Choisne’s factor said they are optimistic that both sides will ultimately negotiate a zero-rif deal in the spirits industry.

In the Italian countryside of Lombardy, giant wheels of over 500,000 Grana Padano cheese each year develop the supply line of family-owned Zanetti. The company, which also produces Parmesan and other hard cheeses, exports more than 70% of its products, with the US accounting for 15% of its total sales.

According to President and CEO Attilio Zenetti, the volatility created by this year’s tariffs is different from before, with contradictory announcements creating a huge amount of additional managers.

“It gives a lot of uncertainty and doesn’t allow us to organize our actual strategy,” he said, bars are trying to ship as many products as possible before higher rates are enforced.

Zenetti said the weaker dollar and tariffs have led to a 25% increase in the company’s US retail price. “We fear that this will affect the volume, of course, as well as further increases, as well as being directly reflected in US wholesale and retail prices,” he said.

For some companies, mitigating the impact of tariffs means considering new supply chain options.

Alex Altmann, a partner at accounting firm Lubbock Fine and a partner at the German British Chamber of Commerce, said some EU manufacturers are considering using existing 10% contracts to move their assembly lines to the UK. In doing so, they must navigate the complexity of the “rules of origin” that determines the source of the product for tax purposes.

Altmann cited an example of a German kitchen appliance manufacturer with strong demand in the US. The company supplies most of its material cheaply from Asia and imports it to the EU at a low cost. He said it would not be that difficult to shift the final gathering process to a British factory.

“We may not have faced these big tariff differences in long periods, but even if we cash them out in a few months, it’s very important money,” he added.

Elsewhere, large companies are considering turning at least some manufacturing into US-German industrial giants SiemensFor example, he told CNBC that it had taken steps to localize its manufacturing industry, and engineering group Bosch similarly said it prioritizes local models to expand its North American operations.

However, with the Skellig Six18 O’Connell, mobile production is not possible. This is because production of “protected” items of origin, such as Irish whiskey, Italian Parma ham, and French champagne, cannot be moved elsewhere.

Instead, O’Connell’s focuses on new potential markets in Asia, Africa and Latin America, but it focuses on the difficulty of doing so in places where existing whiskey sales are not solid. Meanwhile, Combier Distillery Frank Choisne noted that being established in a new location is resource intensive, costly and could take years. In other words, it’s not a simple fix to a decline in US sales.

“This just reminds me that I was in the industry nearly 700 years ago and it takes patience and that things won’t last forever,” O’Connell said. “We need to keep control over our control.”

– CNBC’s Sam Meredith contributed to this story.