Six months ago, before Donald Trump, before tariffs, Clonakilty Distillery reduced the price of its premium whiskey brand in the United States from $60 (€53) a bottle to just under $50.
With the US consumer on the back foot because of inflation, anything above $50 had become “problematic”, says company founder and managing director Michael Scully. “We could see it coming, so we changed our pricing.”
“You might assume the US consumer has a lot of money, but that has changed ... they are still buying their whiskey but they’re not willing to pay as much of a premium,” he says.
Now the business, which relies on the US market for about 20 per cent of sales, is facing a double whammy from tariffs.
The 10 per cent US import tax, which came into effect on April 5th, will add about $5 to the end price of Clonakility’s bestselling “Single Pot Still” whiskey, says Scully, potentially placing it back in the “problematic” zone for US consumers.
And that’s presuming Trump doesn’t go ahead with the 20 per cent reciprocal tariff rate proposed for the European Union.
Trump rode a powerful wave of discontent over the cost of living back to the White House last year, but his tariff agenda, instead of curing the problem, is threatening to exacerbate it. Federal Reserve chairman Jerome Powell has warned that escalating tariffs could fuel inflation while undermining growth, complicating the path for interest rate decisions.
With a quantity of pre-tariff stock already in the United States, Clonakility has several months of lead-in time before the new cost structure applies.
While producers and importers can perhaps take some of the hit in the short term, “eventually everything passes through to the consumer”, says Scully.
The west Cork distillery is emblematic of the small Irish exporter with limited room to cut margins and already shelling out big money to operate in the US.
The high cost of employing sales reps in the US and the three-tier nature of the business there involving importer, distributor and retailer (in many jurisdictions the importer and distributor are the same) adds a significant layer of costs.
So, how will he navigate the current tariff debacle?
“We would have seen the US as the most important market going forward, but we’re reassessing that now,” says Scully.
The company already sells in 14 other markets and recently completed a €3 million investment in its warehousing and operations facilities in Cork. So the plan is to diversify into other markets and/or increase sales in existing markets.
Having delayed entering the United Kingdom market because of Brexit, Clonakility is now looking to grab market share there while strengthening its position in Japan and China.
“The biggest problem with tariffs is the uncertainty and global contagion it is creating all over the world ... so it’s not just the US market,” he says.
At the other end of the scale (in terms of size) is Ornua, owner of the billion-euro Kerrygold brand and the State’s largest dairy exporter with an annual turnover of €3.4 billion. This year marks 10 years since the group’s rebrand from the Irish Dairy Board, a move that coincided with the lifting of EU milk quotas and a 10-year-long dairy boom in Ireland.
In that period, Kerrygold sales have more than doubled, largely on the back of breaking into the hard-to-crack US consumer market, where it is now the number two premium butter brand, a position it has fought hard to achieve, but a position that underlines its exposure to Washington’s protectionist pivot.
In its latest set of annual results, published on Wednesday, Ornua said Kerrygold reached a record number of US households in 2024 but that milestone has to be set against the looming impact of tariffs.
The group’s signature butter product, with the familiar gold leaf wrapping, is on average 50 per cent more expensive than US rivals (a pound of Kerrygold butter currently sells at the premium price of $9.54 in Walmart). It’s a delicate balancing act that tariffs could upset.
'One in five US households consume Kerrygold' – Ornua chief executive Conor Galvin
Speaking to The Irish Times Inside Business podcast this week, chief executive Conor Galvin said the 10 per cent tariff – if maintained – will result in a €50 million hit to Kerrygold over a year. If the tariff goes to 20 per cent, the impact would be about €100 million.
He says the group has been running down product stockpiled in the United States before the tariffs were introduced and has “started” discussions with retailers on pricing for butter now arriving in the US that will be subject to the tariff.
“We are having conversations at the moment about what pricing will be around the 10 per cent tariff,” says Galvin. “We have to be respectful of the consumer that’s paying more for the Irish butter product than the US equivalent product, but equally, I’m tasked with driving value with Kerrygold and particularly for Irish dairy farmers,” he adds.
But at what price point will consumers change their purchasing habits? In economic terms, how elastic is the US market for Kerrygold? “We probably won’t know it until we see it. Right now we command a premium and the business is still growing,” says Galvin.
The ability and/or appetite of United States businesses and consumers to switch to domestic alternatives in the face of higher prices, potentially defraying the increase in import prices and the associated jump in production costs, is the single biggest question hanging over Trump’s trade policy. It will determine the impact tariffs will have on inflation and growth.
Trump’s stated objective is to reignite US manufacturing, which has been gutted by 30 years of globalisation. He has said repeatedly, make your product in the US or face tariffs. Galvin was quick to rule out the prospect of Kerrygold – at some point in the future – transplanting its production and associated inputs to the United States in an attempt to circumvent trade barriers like tariffs.
“Kerrygold is Irish. It’s made from Irish grass-fed milk, and whether it’s butter or cheese, you can rely on that as the provenance,” he says.
As it happens, separate to Kerrygold, Ornua has 700 people working in the US on products using ingredients sourced locally, largely aimed at the food service market there. This unit will be unaffected by tariffs.
Ornua is a big business with resources to stomach tariffs to a point, but Trump’s attempt to recalibrate transatlantic trade presents a big challenge.
For Darragh Cullen, managing director of Tyrone-based Edge Innovate, which manufactures industrial screening machines for the recycling industry, “the only certainty is uncertainty”.
Cullen says he was interviewed by Channel 4 News earlier this month when it seemed Northern Ireland would have a 10 per cent tariff advantage over the rest of Europe (with the EU being hit by a 20 per cent US tariff while the UK’s was 10 per cent). But by the time the programme went to air, Trump had put a stay on the plan and the piece was largely irrelevant.
The United States market accounts for 40 per cent of Edge Innovate’s sales. To make the machines, the company imports engines from the US. If the European Union imposes a 10 per cent retaliatory tariff on US imports, Edge Innovate, because it is based in Northern Ireland (and as per the terms of the Windsor Framework agreement) will be liable for the hit.
And when it goes to sell the finished product back in the United States, it will be liable for another 10 per cent on the American side (courtesy of the current US tariff baseline), effectively a double hit.
But Cullen says everything is up in the air, making it impossible to plan. With Trump regularly changing his mind, it’s hard to plan.
Adding to the uncertainty is the prospect of a United States-United Kingdom trade deal, which might negate US tariffs for Northern Ireland exporters. US vice-president JD Vance said this week that there was a “good chance” of both sides reaching a deal.
With this in the offing, Cullen says his US customers have paused their purchases in the hope they might avoid tariffs by holding out for a few months.
The worst-case scenario is that this period of uncertainty – with no one buying, nobody investing and the final tariff rates still to be determined – continues, he says.
“We don’t know what we’re up against. Our strategy, I suppose, is to wait and see; we can’t go further than that.”
Ireland’s export trade with the US is dominated by pharmaceuticals, manufactured by US multinationals here and sold back to the American market, an anomaly in world trade that is now in the crosshairs of the Trump administration.
Chemicals and related products made up 91 per cent of Irish goods exports to the US in February as companies stockpiled produce in the US in advance of tariffs.
How these big beasts of the trade respond to tariffs is anyone’s guess, but insiders say their operations here are extremely profitable – they generate big dividends for shareholders – and they could perhaps digest tariffs without changing their pricing structures. From the US perspective, as the domestic health service is the single biggest purchaser of imported pharma, tariffs could have a very negative impact on domestic health costs.
In an April 11th letter to European Commission president Ursula von der Leyen, the heads of 30 pharmaceutical companies have warned they are considering diverting as much as €100 billion they had planned to invest in Europe back to the US.
The chief executives of several pharmaceutical giants based in the Republic, such as Pfizer, Eli Lilly, and MSD, said there was a risk of an “exodus” of future investment as the industry redirected funds away from the EU and towards “the US or other fast-growing economies”.
All of which will be music to Trump’s ears.
