Increased American Tariffs Create Hardships for Cyprus' Export-Based Economy
In the global trade landscape, the "Turnberry Accord" — a new trade agreement between the United States and the European Union — has introduced 15% tariffs on over two-thirds of European exports to the U.S., including key Cypriot products like halloumi cheese and wine.
These tariffs have significantly affected the Cypriot export economy, increasing the cost of these recognisable products in the U.S. market. The higher prices make these Cypriot exports less competitive compared to alternatives, potentially reducing demand and complicating Cyprus' efforts to maintain existing U.S. customers and secure new trade agreements.
In 2023, Cypriot exports to the U.S. reached €26.8 million, with halloumi leading the way, accounting for €11 million. Electrical machinery and cocoa preparations also contributed significantly, accounting for €6.1 million and €1.7 million respectively.
The global trade confrontation is causing market volatility and affecting currency exchange rates, with the euro facing downward pressure against the U.S. dollar. This strengthening of the U.S. dollar against the euro makes Cypriot products more expensive for American consumers, adding to the challenges faced by Cypriot exporters.
The worsening international economic climate, coupled with the heavy reliance of Cyprus on the European economy and deep integration with global markets, could further amplify the challenges for Cyprus' economy. Managing foreign exchange risk is critical for the stability and growth of Cyprus' export sector.
Moreover, the uncertainty brought about by the Turnberry Accord affects Cyprus' tourism sector, with potential economic slowdowns and reduced purchasing power in major source markets like Germany, France, and Italy dampening travel demand.
In 2024, Cypriot exports to the U.S. fell to €23.6 million, a 12% decline. The downward trend in Cypriot exports to the U.S. continues in 2025, with €10.2 million in exports in the first half of the year, raising doubts that total annual exports will remain above €20 million.
While the Turnberry Accord brings some predictability to trade relations, it has drawn criticism across Europe for potentially harming the competitiveness of European goods, including those from Cyprus. Businesses that transact in dollars face higher costs due to the tariffs, which negatively impact liquidity and profit margins.
The tariffs have implications for specific products, as certain metals, including aluminum and copper, still carry tariffs of up to 50%. The worsening international economic climate, coupled with these tariffs, could pose significant challenges for the Cypriot economy, particularly on the export sector.
- Despite the European Union's integration with global markets, the increased cost of Cypriot exports due to the Turnberry Accord's tariffs might make it harder for Cyprus to maintain existing EU customers and secure new trade agreements, affecting the overall economy.
- The lower demand for Cypriot exports, like halloumi cheese and wine, in the U.S. market could potentially lead to a reduction in revenue for the Cypriot economy, which relies heavily on exports to the EU.
- The higher prices of Cypriot products in the U.S. market, combined with the strengthening of the U.S. dollar against the euro due to the global trade confrontation, increases the economic challenges faced by Cypriot exporters.
- Financial institutions in Cyprus might face pressures related to foreign exchange risks within the export sector due to the uncertain economic climate and the Turnberry Accord's tariffs, and businesses that transact in dollars could experience negative implications on their liquidity and profit margins.
