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The looming inauguration of U.S. President-elect Donald Trump has stirred concern across the Eurozone, and Cyprus is no exception. Trump’s proposed 10%-20% tariffs on all U.S. imports are sending shockwaves through supply chains, threatening to destabilize the region’s fragile economic recovery. For Cyprus, an island nation heavily reliant on imports, these policies could bring inflationary pressures, disrupt trade, and burden consumers and businesses alike.
Ripples in the Supply Chain
According to an article by Dorita Yiannakou, the proposed tariffs could disrupt the delicate balance of the global supply chain, and Cyprus, which imports nearly all its goods, stands particularly vulnerable. The increased cost of transporting and purchasing products could lead to higher prices for consumers, warns Marios Antoniou, President of the Pancyprian Retail Trade Association. Antoniou points out that while Cyprus’ retail sector has shown resilience, even thriving in 2024 despite geopolitical instability, the island’s dependence on imports makes it highly susceptible to external shocks like tariffs and rising freight costs.
Impact Across Europe
The Eurozone is bracing for higher production and transport costs, reduced competitiveness, and potential retaliatory tariffs from the European Union. European companies may face reduced sales and profitability as their goods become pricier in the U.S. market. Moreover, delays and congestion in global trade networks could further inflate costs. Given that the U.S. was the largest partner for EU goods exports in 2023 (19.7%) and the second-largest for imports (13.7%), the stakes are high for the entire region.
Inflation and Borrowers at Risk
The potential tariff hike adds pressure to an already strained economic landscape. Rising production costs in Europe could fuel inflation, which might deter the European Central Bank (ECB) from cutting interest rates. Economist and KPMG Cyprus Managing Director Tasos Yasemidis explains that such a scenario would directly impact Cypriot borrowers, increasing the cost of loans and mortgages. Weak Eurozone growth, combined with Trump’s policies to bolster the U.S. dollar, could further devalue the euro, making imports from outside the bloc even more expensive.
Energy Prices Add to the Strain
The fallout from the Ukrainian conflict has already forced Europe to replace cheaper Russian gas with costlier American imports, straining businesses and households. Yasemidis highlights how sanctions and rising energy costs are adding to Europe’s financial burden. Tariffs on U.S. imports could exacerbate these issues, driving up production costs and further squeezing the everyday budgets of Cypriots.
Retaliation and Trade War Fears
The EU is considering strategies to mitigate Trump’s tariff plans, such as increasing imports from the U.S. as a gesture of goodwill. However, European officials, including ECB President Christine Lagarde, have warned of potential retaliation, raising fears of a full-blown trade war. Such a scenario could disrupt not only U.S.-EU relations but also global trade, with Cyprus caught in the crossfire.
A Cloudy Outlook
With Trump set to take office and push forward with his tariff agenda, uncertainty looms over Cyprus and the Eurozone. The ripple effects of higher costs, inflationary pressures, and potential trade conflicts could jeopardize economic stability in Cyprus, making daily life more expensive for its citizens. As businesses and policymakers brace for what’s ahead, all eyes will be on the global economic shifts set to unfold under Trump’s administration.
This article was translated and summarized from its Greek original.
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