Trump tariffs: Up to €6bn drop in Irish trade in next year as 25pc of exports hit, business group warns

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Businesses around the globe on Thursday faced up to a future of higher prices, trade turmoil and reduced access to the world's largest market after U.S. President Donald Trump confirmed their worst fears by instituting broad tariffs worldwide.

Trump ramped up his trade war with tariff rates from 10pc to nearly 50pc. He says the levies will bring jobs back to the United States, but company executives were focused on possible increases to prices, reducing shipments or cutting back investment activity outright. 

But markets shuddered at Trump's actions, which could undo decades of global trade patterns - and take many years of adjustment.

"If you say it's fairly certain the economy is going to go down 2pc for the next 2 years, you can manage that," said Bill George, former Medtronic CEO and executive fellow at Harvard Business School. "Now, we have this lack of certainty and lack of predictability for what the policies are going to be, and it'll cause people to go into a holding pattern."

Shipping companies, one of the main conduits of global trade, were among the first to sound the alarm while many other business leaders kept a low profile as they pondered the new reality.

"It clearly isn't good news for (the) global economy, stability and trade," Maersk, the world's second-largest container shipping firm, said in a statement.

German container shipping firm Hapag-Lloyd HLAG.DE also said that tariffs could affect demand, cargo flows and costs. The world's fifth-biggest container liner said it could be forced to adjust its service network in response.

Hunt's ketchup maker Conagra Brands CAG.N said it may have to hike prices to offset the cost of tariffs on various ingredients like cocoa and palm oil, and because it sources the tin mill steel used for its canned goods abroad.

Contrasting with Trump's long-term plan for job creation, carmaker Stellantis STLAM.MI on Thursday said it would temporarily lay off 900 U.S. employees based in facilities in Michigan and Indiana which support assembly plants in Mexico and Canada, where production has been paused.

By contrast, General Motors said it would boost output at its Fort Wayne, Indiana plant, where it makes light-duty trucks that it also produces in Canada and Mexico. Executives have been mulling such a move for a while - CEO Mary Barra in January said on an earnings call that GM could shift some of its truck production in response to tariffs.

ASIAN PRODUCERS HIT

Trump sees tariffs as a way of protecting the U.S. economy from unfair global competition and a bargaining chip for better terms of trade.

The most common method of dealing with tariffs is to raise prices, passing along the cost to customers. Other companies may try to diversify supply chains, but Trump's additional 34pc tariff on China was accompanied by 46pc and 49pc tariffs on Vietnam and Cambodia, respectively - all Asian countries to which companies had been shifting output.

Shares in Western sportswear brands Nike NKE.N, Adidas ADSGn.DE and Puma PUMG.DE all dropped sharply on Thursday as Vietnam, Indonesia, and China are leading markets for them to source products.

In the United States, retailers Target TGT.N and Best Buy BBY.N have said they will have to raise prices, but their margins are more likely to be squeezed.

Shares in Apple AAPL.O fell 8pc, reflecting concerns over the iPhone maker's big manufacturing base in China. Analysts estimated the cost of the ubiquitous devices could rise by 30pc to 40pc, possibly tipping the most expensive models above a $2,000 price tag.

U.S. drinkers will meanwhile pay more for cocktails, champagne and foreign beers, drinks industry bodies said.

Some European companies that primarily serve higher-income consumers were planning to raise prices even before confirmation of the 20pc tariffs on European Union imports.

Italy's Illy Caffe and FerrariRACE.MI have both said they will lift prices, calculating premium coffee drinkers and sports car buyers will be able to absorb the extra cost.

Lavazza, another Italian coffee company, said it could accelerate plans to expand its plant in the U.S..

Giovanna Ceolini, head of Confindustria Accessori Moda, which represents Italian companies in the footwear, leather, fur and tannery industry, said the U.S. tariffs had come when companies are already struggling with increased costs.

"We are afraid that for our companies there will be a slowdown (in demand). It will depend on whether Americans are willing to pay a little more (for our goods)," she said.

The White House says tariffs will encourage more onshoring, similar to the revamped USMCA trade deal Trump signed during his first term that encouraged manufacturing activity to shift from China to Mexico or Canada.

The most severe risk, according to executives interviewed by Reuters, is that businesses simply stop investing.

Spice Kitchen, a small business based in Liverpool, England, which sells spices and gift boxes, said its plans to expand in the U.S. were now under threat.

"It's a scary time, because as a business we see the U.S. as a really big opportunity for export," co-founder Sanjay Aggarwal told Reuters. "This sort of tariff puts a lot of that into question."

Christoph Steitz, Kalea Hall and Jessica DiNapoli, Reuters

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