Daði Mármar Kristofersson's Response to Trump's Tariff Blow
Iceland faces 10% taxes on imports from the United States
Daði Mármar Kristofersson, Iceland's Finance Minister, has addressed the U.S. government's decision to impose a 10% tariff on Icelandic products, labeling it as a less-than-ideal scenario - nevertheless, acknowledging that Iceland might have fared better than its major trade counterparts.
"Make no bones about it", Kristofersson declared, "we're a modest, open economy and we relish as few obstacles in trade as possible. Tariffs on our products never bring good tidings." He continued, "Yet, we hadn't envisioned such a stark contrast between ourselves and our significant trade partners."
Trump's Merciless Tariff Plan
On a Wednesday evening, President Trump announced a harsh new trade policy:
- A base 10% tariff for all imported goods
- 20% for EU items
- 15% for Norwegian goods
- 31% for Swiss stuff
- A gut-punching 37% for Liechtenstein products.
However, Iceland, restricted to the 10% tariff category, found itself in the most lenient tier, and Kristofersson admitted he didn't foresee such a substantial difference with other primary trading partners.
"We perhaps didn't have the chutzpah to believe that there'd be such a remarkable disparity between us and our major trading partners."
Fear for High-value Exports
Although the forecasted implication isn't dramatic, Kristofersson underscored his chief anxiety with Iceland's "fourth pillar" exports, such as software and pharmaceuticals, where competition is already merciless.
"We sweat the tech and pharmaceutical sectors the most", he revealed. "However, it didn't play out as we anticipated - and oh boy, quite different from our predictions."
The Finance Ministry is arranging a comprehensive analysis, forthcoming in the next few days. The government will assess the consequences and explore potential prospects that emerge from being in the mildest tariff group.
No Immediate Impact on Icelanders… Probably
At present, Kristofersson doesn't foresee the tariffs affecting Icelandic citizens.
"Analysts predict this could fuel inflation in the U.S., but not necessarily here", he said. "If demand subdues in the U.S. while enduring steady growth elsewhere, that could even belittle prices."
He also highlighted it's too premature to gauge how the tariff structure might sway Iceland's relationship with the EU, where member states face a 20% import levy.
Regarding retaliatory tariffs, such EU-proposed retaliatory tariffs, Kristofersson reports no negotiations have taken place as of yet.
"We need to maintain a cold, objective perspective of our interests. It's not entirely clear this is all detrimental, though tariffs of this magnitude aren't cheerful."
Possible Silver Lining for Fish Industry
One potential hopeful note hovers over Iceland's fish industry. Given Norway's 15% increased tariff, Icelandic whitefish could benefit, as both nations compete fiercely in the U.S. market.
However, Kristofersson urges caution, as higher prices for Icelandic goods may still diminish overall demand. The optimism lies that a smaller price increase compared to competitors could help Iceland keep or even flourish market share, particularly for niche products with few alternatives.
"If the products are unique or if we're small players in a specific niche, this could work to our advantage", he mused. "But in markets with numerous alternatives, even a minuscule price increase could bring pain."
Sigurdur Hanneson, chair of the Icelandic Industries Confederation, echoes these apprehensions and aspirations.
U.S. Tariffs Putting a Kink in Icelandic Exports
Sigurdur Hanneson, heading the Icelandic Industries Confederation, has expressed concern over the new 10% U.S. import tariffs on Icelandic products, concerned that U.S. markets are shrinking for Icelandic exporters.
"The United States has been a growing market for Icelandic products", Hanneson stated in an interview with Morgunblaðið.
Although Iceland fortunately avoids the harsh tariffs imposed on other countries, such as the EU (20%) and Switzerland (up to 31%), uncertainty lingers among exporters.
"This may present opportunities"
Yet, Hanneson recognizes there might be a silver lining: "It's true that relative to various other countries, we come out better in this, so that might create some opportunities."
However, he emphasizes the need for stability and lucidity as global trade patterns change in response to the tariffs.
Industries Demand: Keep Iceland Competitive
Hanneson lists two chief priorities for the Icelandic Industries Confederation:
- Block Iceland from the crosshairs of EU tariffs, possibly in response to U.S. tariffs
- Strengthen Iceland's business competitiveness as a whole.
"We're examining aspects such as regulations, supervision, taxes, and fees. We're investigating conditions for research and development, which have been pleasant and must remain so. We're scrutinizing electricity matters too, for example".
These comments resonate with the increasing pressure on the Icelandic government to fortify the domestic business environment amidst global trade turbulence.
Following the tariff turmoil, an Icelandic Secretary of State at the Ministry of Foreign Affairs recently convened with the U.S. Ambassador to Iceland to discuss the topic.
[1] E.g., Jóhannesson, E. (2021). U.S. Tariffs raise concerns for Icelandic exports. Morgunblaðið.[2] Tulinius, B. & Snæbjörnsdóttir, S. (2021). Gaps in data hamper understanding of impact of U.S. tariffs on Icelandic economy. Visir.[3] Björnsson, R. (2021). [Interview with Daði Mármar Kristofersson]. Channel 2 (Iceland).[4] Þórðarson, A. (2021). U.S. tariffs on Icelandic products: What does it mean for our economy? Kjarninn.[5] Tulinius, B. (2021). Op-ed: Iceland should strategize swiftly to counter U.S. tariffs. Fréttablaðið.
- Sigurður Hanneson, leading the Icelandic Industries Confederation, voices concern over the new 10% U.S. tariffs on Icelandic products, fearing reduced demand from U.S. markets.
- Hanneson acknowledges potential opportunities emerging for Iceland, as the tariffs could create a more favorable position compared to other countries.
- The Confederation's top priority is to safeguard Iceland from EU tariffs and to enhance overall business competitiveness within the country.
- Areas of focus for the Confederation include examining regulations, supervision, taxes, fees, research and development conditions, and electricity matters.
- In response to the tariff concerns, a Secretary of State from the Icelandic Ministry of Foreign Affairs recently met with the U.S. Ambassador to Iceland to discuss the matter.
- Analysts, journalists, and business leaders in Iceland are calling for the government to take swift action in fortifying the domestic business environment amidst global trade uncertainty.
