Icelandic products now bear a higher cost due to an increase in tariffs.
In a move that could escalate trade tensions, the U.S. President, Donald Trump, has signed an executive order imposing new tariffs on imports from multiple trade partners. The new tariffs, scheduled to take effect in a week, will range from 10 to 41 percent, with Canada and Iceland among the affected countries.
The tariff increase on Icelandic goods, from the current 10 percent to 15 percent, has been met with disappointment and surprise by Icelandic Foreign Minister Þorgerður Katrín Gunnarsdóttir. In a statement to mbl.is, Gunnarsdóttir expressed her dissatisfaction with the tariff increase, stating that tariffs are harmful and do not benefit households or businesses in Iceland.
The tariff increase on Canadian goods, which will rise from 25 percent to 35 percent, has also raised concerns among Canadian and Icelandic ministers. In response, Gunnarsdóttir has requested immediate talks with U.S. representatives regarding the tariff increase.
This tariff regime is described as a "new system of trade," affecting nearly 70 countries. For Canada, the 35 percent tariff will significantly raise the cost of goods entering the U.S., potentially leading to higher retail prices for consumers and businesses relying on Canadian products. Icelandic imports will face at least a 15 percent tariff, which could also lead to increased costs for importers and consumers.
The potential implications of these tariff increases extend beyond increased costs. Trade tensions could escalate, potentially leading to retaliatory tariffs on U.S. exports, harming sectors such as agriculture, automotive, and energy. Businesses relying on cross-border supply chains between the U.S. and Canada might face increased costs and logistical complications, leading some to reconsider sourcing strategies or relocate operations to avoid tariffs.
The Trump administration has justified these tariffs largely based on trade deficit considerations. The increased tariffs aim to reduce the U.S. trade deficit with countries like Canada by making their goods more expensive and less competitive in the U.S. market. However, Gunnarsdóttir believes that the economic indicators between Iceland and the U.S. do not align and needs further examination.
Despite the tariff increase, Gunnarsdóttir refers to the U.S. as a close ally. The White House has left room for further trade negotiations before the tariffs take effect, offering a glimmer of hope for a potential resolution. Gunnarsdóttir's statement suggests a desire for further trade negotiations between Iceland and the U.S.
The tariff measures have created uncertainty among some of the U.S.'s closest allies, with concerns about potential inflation in the U.S. as a result of the increased costs. However, the Trump administration is confident that the tariffs will strengthen American exporters and stimulate domestic production.
As the deadline for the tariff implementation approaches, both countries are left in a state of anticipation, hoping for a peaceful resolution and a continuation of the strong and longstanding trade relationship between Iceland and the U.S. that Gunnarsdóttir previously highlighted in a letter to the U.S. trade representative.
The tariff surge on Canadian and Icelandic goods, as a result of the new policy-and-legislation presented by the Trump administration, has stirred business concern and political unease among the affected countries. Icelandic Foreign Minister Þorgerður Katrín Gunnarsdóttir has requested immediate talks with U.S. representatives to discuss the potential negative impact of these tariffs on her country's businesses and general-news outlets have been reporting on the escalating monetary issues and their potential ramifications in the realm of finance and politics.
