LAST UPDATE | 11 Sep

SEVERAL MEDIUM-SIZED Irish drinks firms are considering pulling “hundreds of thousands” worth of investment from their US operations on foot of President Donald Trump’s 15% tariff on goods from the EU and Ireland, and 10% on goods from Northern Ireland.

Eoin Ó Catháin, the Director of the Irish Whiskey Association (IWA) told The Journal that it has heard from multiple firms that are looking to invest in other markets, and are even pulling plans to hire additional on-the-ground sales reps in the US as part of an assessment of the potential impact of tariffs.

“We are hearing from multiple SMEs [small to medium-sized enterprises] who have made significant investments in the US market who are now considering pulling staff and changing their plans.

“Bigger companies are more able to shoulder the costs, but it will take a long time to change direction as Irish products are so well known in the US, but eventually the tariffs are going to have a wide and varied impact, and other firms will follow suit and look to other markets,” Ó Catháin said.

The IWA, which is the representative body for the Irish whiskey industry, has repeatedly called for a return to zero tariffs. 

A US appeals court recently made a divided ruling that the so-called “reciprocal” tariffs imposed by Trump are illegal, but they are due to stay in place anyway until 14 October in order to give him time to make a Supreme Court appeal.

It’s widely expected that the Supreme Court – which has gone Trump’s way in past key decisions – will uphold the tariffs.

John Kelly, the CEO of Belfast Distillery which produces McConnell’s Irish Whiskey, said that his firm and others are already now looking towards expanding their spending in other markets.

John Kelly, CEO of Belfast Distillery.

The firm produces somewhere in the region of 500,000 litres of product annually and also operates a visitor experience at its distillery in Belfast.

“The US would be our current biggest market, followed by Canada, Australia and then the Republic of Ireland.

“The tariffs cause major disruption, and we’re now looking at increasing our spend in other markets, including Japan where we’ve started doing business, Korea, and South Africa, where we’re now increasing our spend,” Kelly said.

“We can’t take on the hit to our margins from these tariffs, so we have to pass some of that on to our US retailers, and they will have to pass that on to the consumer, so inevitably, we will see the price of our US products go up, I would say by around 10%,” he told The Journal.

“I still have hope that we can get back to that tariff free space, but we are being forced to think about where else we can go now,” he added.

Ó Cáthain said that prices for Irish spirits will go up on US shelves across the board if the tariffs stay in place.

Trump has made tariffs a key pillar of his economic policies from the start of his second term.

They have been imposed on almost all the US’s trading partners; in Irish terms, they will impact mainly food and drink imports.

Seamus Coffey, the chair of the Irish Advisory Fiscal Council, told The Journal that tariffs will hit small to medium-sized businesses, like spirits firms, but that the real overall impact to Ireland will be in terms of corporation tax take.

He explained that many US companies producing goods in Ireland are doing so through subsidiaries that are essentially trading with their parent companies.

“The values attached to those goods are essentially decided by the companies, so they can sell those products to themselves for less. They will change the prices they are charging themselves, and thereby reduce the tariffs that will impact corporation tax take in Ireland,” Coffey said.

He said that this is currently a source of “big worry” within Government offices.

“People in various offices are burning the midnight oil on this, it’s quite understood that there’s a potential fiscal shock coming through this,” Coffey said.

“If a company in Europe can’t pass on that cost to the consumer, they have to absorb it. They may do that by either having lower profits, or they may try to squeeze their suppliers,” he further explained.

He said that for some smaller companies that can’t absorb the increased costs associated with tariffs, “it’s going to no longer be worth trading in the US”.

He said that beyond the alcohol and dairy sectors, sales of second-hand planes by US leasing firms based in Ireland could be hit badly.

“If leasing companies can’t sell their products, their used aircraft in the US, they might up sticks and leave. Part of their business model is that they will eventually have a second-hand plane they want to get rid of, they don’t keep them until end of life, necessarily.

“If that is no longer viable here, the leasing part might go as well, and that has all sorts of other implications. If it does go, that will make our GDP look kind of weird,” he said.

Coffey added that no one expects the Supreme Court to go against Trump, and that this spells trouble for Ireland, as we are more exposed than “any other EU country” in terms of these tariffs.

“About 27% of our goods exports go to the US. We’re almost three times more exposed than the next most exposed country in the EU,” he said.