Irish butter and cheese look set to be the biggest losers if new tariffs imposed by the US on EU imports come into being in two weeks’ time. Analysis has shown that the potential impact could be as high as €41m for Irish butter and cheese imports into the US.

If this cannot be recovered from the market, it would see the cost being pushed back to Irish farmers. Based on 8bn litres of milk, this would potentially see milk taking a hit of 0.5c/litre.

Ireland is one of the worst hit within the EU with products such as Irish butter, cheese, cream liqueurs and pork among the products to be hit with new US tariffs.

The tariffs come as a result of a ruling by the World Trade Organisation last week which found that the US had the right to target EU imports because the EU provided illegal support to plane maker Airbus. As a result, Irish dairy imports will be the target of an additional 25% tariff which looks set to be imposed before the end of the month.

Up to 38,000t of Irish dairy products could be affected

Well-known Irish brands such as Kerrygold and Baileys, which have been hugely successful in the US market in recent years, look set to be the biggest losers. Up to 38,000t of Irish dairy products could be affected, which includes around 30,000t of butter and around 7,000t of Irish cheese.

Dairy Industry Ireland, which represents the views of the processors has said that this is hugely disappointing news as it had been working hard with EU authorities to try and ensure that Irish dairy products did not get dragged in as an unintended consequence of the aircraft tariff dispute.

Companies such as Kerry, Glanbia and Ornua are huge employers within the US economy and have a long record of investment in the US.

Kerrygold has become the number one imported butter brand in the US

Last year, butter exports to the US hit €161m. Irish butter accounts for 90% of EU butter exports to the US and is already exposed to limited quotas and hefty duties and tariffs.

Despite this, Kerrygold has become the number one imported butter brand in the US and the second most important brand overall, selling some three million packets per week.

Retailing at around $3.50 for a 227g pack, Kerrygold would see the price of a pack of butter increasing by almost $1 should the additional tariff be pushed on to the consumer.

However, a spokesperson for Ornua has warned that if this cannot be recovered in the market, it would have to be pushed back along the supply chain.

While this new US tariff regime is a result of a ruling on Airbus, there is also a ruling pending on Boeing on the other side.

Cheese is much more important from an EU perspective

The big issue here is that a 25% additional charge on top of what is an already expensive product could see consumers choosing a less expensive domestic product or a non-EU import. Overall, this reduces the competitiveness of EU dairy in the US market, could reduce promotional spend and encourages US consumers to shop around, which could have a much longer-term impact on volume.

Cheese is much more important from an EU perspective as the US imports 134,000t of European cheese. Around 55% of this or 73,000t would be subject to the new tariff. The EU would not want to lose this market, especially in the likelihood of a hard Brexit.