Trump's Tariffs: European Olive Oil Producers Brace for Market Disruption

Summary

Paul Krugman called the tar­iffs announced by President Trump the biggest trade shock in his­tory, with a 20 per­cent duty on olive oil imports from all European Union coun­tries. The tar­iffs will make olive oil more expen­sive for U.S. con­sumers, poten­tially reshap­ing the global olive oil mar­ket and impact­ing pro­duc­ers in coun­tries like Spain, Italy, and Greece.

The Nobel Prize-win­ning trade econ­o­mist Paul Krugman called the sweep­ing tar­iffs announced by President Donald J. Trump ​“the biggest trade shock in his­tory.” 

The tar­iffs include a 20 per­cent duty on imports from all European Union coun­tries, includ­ing Spain, Italy, Greece and Portugal.

U.S.-based pro­duc­ers, importers, and European experts have pre­dicted that the tar­iffs would make olive oil a lot more expen­sive, lead­ing to a pull­back in con­sump­tion in favor of cheaper, less healthy seed oils.

Other olive oil-pro­duc­ing coun­tries, includ­ing Argentina, Algeria, Chile, Morocco, Turkey and Uruguay, face the base­line 10 per­cent tar­iff applied to nearly all other coun­tries.

Meanwhile, imports from Tunisia will face a 28 per­cent tar­iff, South African exports to the U.S. will be sub­ject to a steep 31 per­cent tar­iff, and Israeli exports will incur a 17 per­cent tar­iff.

“They [the Trump admin­is­tra­tion] basi­cally took each country’s trade bal­ance with the United States, divided by the amount of their imports and cut that in half,” Krugman said. ​“It was a kind of weird cal­cu­la­tion.”

According to data from the United States Department of Agriculture (USDA), the most recent com­plete dataset avail­able, in 2023, the U.S. imported $713 (€693) mil­lion of olive oil from Spain. 

Separate data from Spain’s Ministry of Agriculture, Fisheries and Food show that olive oil exports to the U.S. increased by 57.7 per­cent last year, exceed­ing $1 bil­lion (€920 mil­lion). 

The world’s sec­ond largest con­sumer of olive oil also imported $707 (€653) mil­lion from Italy, $216 (€200) mil­lion from Tunisia, $213 (€197) mil­lion from Turkey, $101 (€93) mil­lion from Greece and $230 (€213) mil­lion from other coun­tries.

Currently, U.S. local olive oil pro­duc­tion accounts for less than five per­cent of the cur­rent level of con­sump­tion, which has grown expo­nen­tially across the last decades.

After the Trump administration’s announce­ment, Dcoop noted that the new tar­iffs ​“harm inter­na­tional trade and end up affect­ing the entire chain, from ranch­ers and farm­ers to the con­sumer (in this case, the American con­sumer), who is the final link that ends up assum­ing the increase in costs.”

According to the world’s largest pro­ducer, olive oil that will not reach the United States because of the tar­iffs will be sold in other mar­kets. It warned that more com­pe­ti­tion could ensue and prices could decrease, hurt­ing the pro­duc­tion chain.

Institutions in Andalusia, Spain’s heart of olive oil pro­duc­tion, are gear­ing up to cope with the new tar­iffs. 

The goal is to unite the agri­cul­tural sec­tors and look for more promis­ing mar­kets as the U.S. may become less appeal­ing.

The regional gov­ern­men­t’s ini­tia­tives also intend to mon­i­tor the impact that a more exten­sive avail­abil­ity of agri­cul­tural prod­ucts, such as olive oil, on the national and European mar­kets might have on prices and mar­gins for the pro­duc­tion chains involved.

In 2024, Andalusia alone exported €860 mil­lion ($945 mil­lion) of extra vir­gin olive oil to the United States.

María Morales, the pres­i­dent of the farm­ing orga­ni­za­tion Asaja-Sevilla, warned that dif­fer­ent tar­iffs imposed on the Mediterranean banks may cause fur­ther imbal­ance.

“Many coun­tries on the other side of the Mediterranean [espe­cially Turkey], our com­peti­tors in the U.S., have lower tar­iffs. So it will be eas­ier for them to export,” she noted.

Record olive oil pro­duc­tion reported in Turkey, com­bined with lower tar­iffs, makes the coun­try an ideal can­di­date for increas­ing exports to the United States.

Currently, Turkish exports to Spain slightly exceed those to the United States. As tar­iffs turn the tables, vol­umes could quickly shift.

The Spanish gov­ern­ment has already announced com­pen­sa­tion for up to $15.7 (€14.4) bil­lion to help the country’s com­pa­nies cope with the shock. This safety net will be extended to all major eco­nomic sec­tors hit by the new tar­iffs.

Those same tar­iffs are wor­ry­ing the Italian olive oil sec­tor as well. Many Italian olive oil exports are des­tined for the United States, reach­ing approx­i­mately 100,000 tons.

“The U.S. is the num­ber one export mar­ket for Italian extra vir­gin olive oil,” said Nicola Ruggiero, pres­i­dent of the Oliveti d’Italia Consortium. ​“Of the €3 bil­lion ($3.3 bil­lion) in exports in 2024, about €1.1 bil­lion ($1.2 bil­lion) comes from trade with America.”

According to Ruggiero, with the new tar­iffs, a slow­down can be expected ​“in the short-term, but we don’t yet know how American con­sumers will react. Many buy extra vir­gin olive oil for health rea­sons,” he remarked.

Still, in a note, the Italian Trade Agency (ICE), an Italian gov­ern­men­tal agency, warned oper­a­tors that many uncer­tain­ties loom on sev­eral sec­tors as April 9^th approaches, the day the tar­iffs should come into force.

According to ICE, tar­iff exclu­sion mech­a­nisms might be acti­vated for indi­vid­ual com­pa­nies or prod­ucts when the imported goods are not domes­ti­cally avail­able in the United States.

While the tar­iffs will come into force too quickly for com­pa­nies to build new fac­to­ries in the U.S., some large inter­na­tional bot­tlers have been inves­ti­gat­ing poten­tial solu­tions.

“ We’ve been inves­ti­gat­ing if there’s the oppor­tu­nity to work with some­body [to co-pack in the U.S.] because we’re not going to be able to build a fac­tory in America in time,” Walter Zanre, the man­ag­ing direc­tor of Filippo Berio UK, told Olive Oil Times in an inter­view two weeks before the tar­iffs were announced.

“Perversely, President Trump is right because [tar­iffs mean] we are going to have to bot­tle in the United States and cre­ate jobs in America, and we’re prob­a­bly going to have to let peo­ple go in Italy because we’re reduc­ing pro­duc­tion there,” he added. ​“So he achieves his goal of mov­ing employ­ment from out­side of America into America.”

Another major European olive oil pro­ducer, Greece, exports about 20,000 tons of extra vir­gin olive oil annu­ally to the United States.

In Greece, olive oil pro­duc­ers are ask­ing the Ministry of Development for pro­tec­tion from the con­se­quences of the new tar­iffs, which are not easy to fore­see.

“We are clearly con­cerned about the devel­op­ments,” said Dimitris Evangelinos, a spokesman for the Agricultural Cooperative of Organic Olive Producers of Olynthos, in north­ern Greece.

“The 20 per­cent tar­iffs that were announced will cer­tainly result in the prod­uct on the super­mar­ket shelf being more expen­sive,” he added.

He believes the new con­di­tions will pres­sure the profit chain and farm­ers. ​“All of this while the cost of pro­duc­tion has made the sus­tain­abil­ity of the pro­fes­sion more dif­fi­cult, and we also have cli­mate change that affects our har­vest,” Evangelinos said.

He did not rule out that new con­di­tions might arise. ​“In the past, with President Donald Trump, there were announce­ments, and they were with­drawn for olive oil. We hope the same will apply now,” Evangelinos said.

Local experts added that the new tar­iffs will affect the agri­food sec­tor, which accounts for about 37 per­cent of all Greek exports to the U.S.

That rep­re­sents a value of €450 mil­lion ($495 mil­lion) out of the total €2.4 bil­lion ($2.64 bil­lion) worth of Greek ship­ments to the U.S.

According to local media, many extra vir­gin olive oil pro­duc­ers risk los­ing com­pet­i­tive­ness and mar­ket share in the U.S. in the medium term.

While most E.U. observers of the olive oil mar­ket con­cur that some time will pass before they under­stand the impact of the new tar­iffs, most oper­a­tors and asso­ci­a­tions said a uni­fied response from Brussels is needed.

“The E.U. can­not stand idly by in a world where trade bal­ances are chang­ing rapidly and Trump has wrecked the World Trade Organization (WTO) agree­ments,” said Ricardo Serra, pres­i­dent of Asaja-Andalucía. 

Noting how the E.U. adapted its agri­cul­tural poli­cies for years to meet WTO stan­dards, Serra said, ​“We have removed tar­iffs and linked CAP sub­si­dies to crop pro­duc­tion, and now it turns out that overnight and in one fell swoop, Trump has blown all of that up.”