Consumers facing higher prices as trade war grows,

Irish consumers are facing pricier groceries, clothes, washing machines, and DIY materials if the global trade war escalates, writes Louise McBride

THE coming months and year could become even more expensive for Irish consumers as Brexit and the prospect of a global trade war threaten to push up prices. Consumers could be hundreds — if not thousands — of euro a year worse off as result. Irish prices are already the third-highest in the European Union — and Dublin was recently ranked by Mercer as the most expensive city in the eurozone for expatriates to live in. So any further price increases could see many consumers struggling to make ends meet.

So where could consumers be hit in the pocket over the next year?

TRADE WAR

You could be paying much more for your baby powder, peanut butter, orange juice, jeans, bed linen and kitchen sinks by the end of the summer — while the price of certain brands of dishwashers and washing machines could jump up in the future. This is due to the trade war which has erupted between the United States and the rest of the world. Should this trade war escalate, it could become one of the biggest threats to consumers’ pockets in the coming years.

In late June, the EU slammed tariffs of 25pc on a host of American products. The move was a response to the US President Donald Trump’s earlier tariffs on steel and aluminium.

Some of the American goods hit by the 25pc EU tariff include orange juice (such as Tropicana), cranberry juice, peanut butter, sweetcorn, rice, maize, bourbon whiskey (such as Jack Daniel’s), cigarettes and cigars, baby powder and other skincare powders, and certain cosmetics.

A raft of clothes imported into the EU from the US — including trousers, cotton T-shirts and shorts, denim jeans, and certain shoes — will also be hit.

So too will homewares such as cotton bedlinen and baking appliances — and big-ticket items like motorbikes (such as Harley Davidson), mopeds, yachts, motor boats, and canoes.

“It could take a month or two for the EU tariffs on US clothes to be passed through to consumers — but they will be passed through because a 25pc tariff is too large for retailers to absorb themselves,” said Thomas Burke, director with Retail Ireland.

Indeed, the maker of Jack Daniel’s has already said it will rise the price of the drink in the EU by about 10pc by the autumn — as a result of the EU tariffs.

DIY enthusiasts and builders are also facing higher prices as the EU tariffs have been imposed on various steel, aluminium and iron products — including stainless steel sinks, nails, and iron and steel ladders.

The tariffs affect American goods imported into the EU from the US. Goods manufactured by US companies in Europe should escape the tariffs — hence Harley Davidson’s recent announcement that it will move some of its operations into the EU.

The number of US goods on Irish supermarket shelves is low. All the same, consumers could start to feel the impact of those tariffs by late August, or earlier.

“The concern is that this could be the start of tit-for-tat tariffs — and the question is how farreaching the implications of those tariffs could be over time,” said Burke. “It isn’t clear what the impact of these tariffs will be on products which have ingredients affected by the tariffs.”

Rice, for example, is a key ingredient in various baby foods and beers.

A second batch of American products could also be eventually hit by the EU tariffs — and in this case, the tariffs could be as high as 50pc.

Some of the goods in the second batch which are set for a 50pc tariff include dishwashers, washing machines, electronic readers (such as Kindles), wireless controllers for games systems, sunbeds, feather or down duvets, cotton blankets, and garden umbrellas. “Whirlpool washing machines could be impacted,” said Burke.

Trump has also warned that he might impose tariffs on cars imported from the EU into the US. Should this arise — and the EU retaliate in kind — the cost of US-made cars is likely to shoot up here too. “There are no winners in a trade war,” said Burke. “We live in a very globalised world.”

BREXIT

Theresa May’s soft Brexit plan and proposal for an open Irish border may well abate the threat of a hard Brexit — if it goes through. Under this plan, the British prime minister is hoping to create a free trade area between Britain and the EU for industrial goods and agricultural products.

However, there is still a lot uncertainty around how Brexit will play out — and whether May’s plan will go through.

Should a hard Brexit still unfold, you could be paying 46pc more for your milk and cheese once Brexit kicks in — and 30pc more for your sliced pan.

This is what the Economic and Social Research Institute (ESRI) found in its recent research into the possible impact of a hard Brexit on Ireland. The study found that a hard Brexit could increase the cost of living of an average Irish household by as much as €1,360.

Britain is due to leave the EU in late March 2019. Consumers could see a big hit to their pockets following Brexit — because of Ireland’s close economic ties to, and shared border, with Britain.

Almost one in four of the goods imported into Ireland come from Britain; about one in nine of Irish goods exports go to Britain, according to the latest official figures.

In its study, the ESRI also found that in the event of a hard Brexit, the price of chocolate and confectionery could increase by up to 27pc; the price of coffee and tea by 20pc; the price of meat by 24pc and the price of processed foods by 15pc.

These figures are based on tariffs being introduced — and other trade costs also increasing — following a hard Brexit.

“One of the biggest concerns about the global trade war from an Irish perspective is if the tariffs are a prelude to what we can expect with Brexit next March,” said Burke. “We source between 60pc and 70pc of all processed food products from Britain.”

The cost of detergents and kitchen items is also likely to increase under a hard Brexit, according to Alan McQuaid, chief economist with Merrion Capital. “We import a lot of our cereals from Britain so a lot of those products could become more expensive,” said McQuaid.

WORST OF PRICE RISES

Consumers have already endured many price rises over the last year with some of the worst being in rent, property, electricity, gas, home heating oil, transport, education, house insurance and travel insurance.

Official figures show the cost of motor insurance is falling — though this differs to the on-the-ground experience of many motorists. The cost of food and drinks in restaurants and hotels has gone up — indeed some Dublin city restaurants are charging more than €10 for a glass of wine.

Doctor’s fees have become more expensive — as have dental and postal services. By contrast, the price of many groceries has fallen over the last year — but this could change quickly.

“A trade war is not good news for Ireland as we are an open economy,” said McQuaid.

“There’s very little consumers can do when tariffs are imposed — especially when it comes to food and energy. People will be feeling less money in their pockets.”