Trump's "Liberation Day" tariffs bring some surprising short-term consumer gains. But big risks for prices, supply chains, and economic growth also loom large.
Donald Trump’s sweeping "Liberation Day" tariffs have shaken global markets and already caused plenty of economic turmoil.
While the longer-term economic consequences could be serious, there are also some surprising short-term benefits for consumers —from cheaper holidays and fuel costs to the prospect of lower energy bills and mortgage rates.
But the tariffs also carry big risks: supply chain disruptions, potential price hikes, and a drag on economic growth that could hit consumers hard in the months ahead.
Here's how it might affect your pocket...
Travel
If you're heading to the United States this summer, you might find your wallet stretches a bit further than you'd expected.
The chaos caused by Trump’s tariffs has sent financial markets into turmoil and weakened the US dollar.
Before Trump’s “Liberation Day” announcement, €1 got you only around $1.07. And near the start of the year, both currencies were trading near parity. But today a euro will get you around $1.15.
And while forecasting exchange rates is notoriously difficult, the general consensus is that the dollar will weaken further over the coming weeks and months, if Trump pursues his wild economic agenda, making your holiday even cheaper.
A weaker dollar also means anything traded in dollars, such as oil, becomes less expensive in real terms. Which brings us on to our next point...
Petrol and diesel
The price of a barrel of oil has fallen by over 12% in the past few weeks, from around $75 to $65, as fears mount that Trump’s tariffs will lead to slower global economic growth and reduced energy demand.
This should be positive for prices at the pump. And as oil is bought and traded in dollars, the fall in the value of the dollar makes it even cheaper in euro terms.
In real or "euro" terms, a barrel of oil is now around 20% cheaper to buy.
However, it's important to remember that over half of the price we pay for petrol and diesel goes to the Government in the form of taxes. So a 20% fall in the price of a barrel of oil won’t lead to a similar-sized fall in fuel prices.
Nonetheless, motorists should still expect to pay a few cents less at the pump over the coming weeks.
Gas and electricity
Similar to oil, the price of gas on wholesale markets has fallen by around 20% in recent weeks due to fears of a worldwide recession.
Since we use gas to generate around 50% of our electricity, this will also put downward pressure on electricity prices.
But don’t expect a major fall in your energy bills just yet.
Energy suppliers purchase their energy for delivery at different times throughout the year—and sometimes up to 12 or 18 months in advance—through hedging. This helps protect households from extreme price swings on a weekly or monthly basis.
As a result, the price households pay is typically an average of wholesale costs over a longer period. So we'll need to see a sustained reduction in wholesale energy prices for several more weeks before bills start to shrink.
Additionally, wholesale energy costs only make up about 50% of the final price of a typical energy bill. The rest consists of VAT, levies like the carbon tax and PSO levy, supplier margins, and "grid fees."
Grid or network fees—covering the cost of transporting electricity and gas around the country—make up around 30% of energy bills. These are likely to increase later this year as ESB and EirGrid require billions more euro over the coming decade to help the country meet NetZero goals and accommodate a growing population.
So unfortunately, any fall in wholesale costs may simply be negated by rising grid fees.
Consumer goods and services
There’s a lot of confusion about how Trump's tariffs might affect the price of consumer goods.
In theory, the tariffs shouldn’t impact consumer prices here in Ireland. The tariffs apply to imports into the US—making goods more expensive for American consumers. They don't directly affect Irish or European consumer prices. In fact, a weaker dollar could even make American goods and services cheaper here.
However, if the EU retaliates with tariffs on US imports, it could raise the cost of American products in Europe.
Moreover, Trump’s tariffs could still be inflationary globally, given the complexity of interconnected supply chains.
Major companies could also decide to share the cost of tariffs across consumers in multiple regions so that the large American market doesn't take the full hit. For example, if Trump’s import tariffs were to lead to a €300 increase in the price of the average iPhone for American consumers, Apple could decide to hike the price of an iPhone by €150 in Europe and by only €150 in America instead. Or it could even leave the American price unchanged and let other consumers bear the full cost.
Indeed, Sony just recently decided to raise its PlayStation 5 prices in Europe and the UK by around 10 to 11%, partly as a result of the tariffs, while actually leaving them unchanged in the US!
Another factor is China.
Relations with China and America are pretty much near an all-time low. Even if Trump rows back on implementing tariffs on European goods, they’re likely to remain in some form for China. Faced with a glut of goods that it can’t sell at a competitive price into the US market, China could resort to dumping surplus goods into Europe at super-cheap prices instead. And this would obviously lead to lower prices for consumers…
For now, there is a lot of uncertainty about how the tariffs will affect consumer prices and inflation. But at the moment, the consensus is that they will be disinflationary.
Mortgage rates
In April, the European Central Bank (ECB) cut interest rates for the seventh time in under a year, bringing its key rate down to 2.25%, and the rate off which tracker mortgages are priced down to 2.40%.
Until recently, the ECB had been expected to hold rates steady in April, with only one more cut expected later this year. But the economic uncertainty caused by Trump's actions forced the ECB to cut rates sooner to support growth. And there may now be two or three more rate cuts before year-end—a welcome development if you're a tracker customer or considering switching your mortgage.
Too good to be true?
A better exchange rate, lower fuel costs, potentially cheaper gas and electricity, and lower mortgage rates.
It almost seems as if Trump's tariffs are a good thing!
But while all of this is undoubtedly good news for consumers in the short term, it’s happening against a backdrop of major concerns about the broader impact on economic growth, employment, and long-term prosperity.
This could all force the Government to hike taxes and cut spending on welfare, meaning consumers are worse off in the long run.
