Increased American Tariffs Strain the Export Sector of Cyprus' Economy

Cyprus, a small island nation in the Mediterranean, is facing economic challenges due to the worsening international economic climate and trade disputes. According to the Cyprus Statistical Service, electrical machinery and cocoa preparations, along with a significant export, halloumi, contribute significantly to Cypriot exports to the U.S.

In 2023, Cypriot exports to the U.S. reached €26.8 million, with halloumi, electrical machinery, and cocoa preparations leading the way. However, the global trade confrontation and the subsequent market volatility are causing concerns for Cypriot companies.

The U.S. and the European Union have entered a new era of trade protectionism with the "Turnberry Accord," which has imposed 15% tariffs on over two-thirds of European exports to the U.S., affecting the competitiveness of these exports. Although Cyprus is not a direct target of these new tariffs, its heavy reliance on the European economy and deep integration with global markets mean it is not immune to the effects.

The imposition of tariffs on strategic industries such as automotive, pharmaceuticals, and semiconductors could have a significant impact on Cypriot exports to the U.S. The strengthening of the U.S. dollar against the euro also makes Cypriot products more expensive for American consumers, and businesses that transact in dollars face higher costs, which negatively impact liquidity and profit margins in Cyprus.

The 15% tariff on goods such as halloumi and Cypriot wine is expected to raise their cost in the U.S. market, making them less competitive. As a result, exports fell to €23.6 million in 2024, a 12% decline, and the downward trend continues in 2025, with €10.2 million in exports in the first half of the year. This raises doubts that total annual exports will remain above €20 million.

Managing the foreign exchange risk is critical for the stability and growth of Cyprus' export sector. The worsening international economic climate, fueled by trade disputes, could continue to negatively impact the Cypriot economy.

The uncertainty from the agreement also affects Cyprus' tourism sector, potentially dampening travel demand from major source markets like Germany, France, and Italy due to economic slowdowns and reduced purchasing power. Domestic consumption, food exports, and tourism all play a cumulative role in Cyprus' economy and could be affected by the worsening international economic climate.

Cyprus' largest importers are the European Union and the United Kingdom, with significant trade also involving Germany. These countries could potentially influence their trade with Cyprus due to economic changes stemming from the Turnberry Agreements.

In conclusion, Cyprus faces significant economic challenges due to the worsening international economic climate and trade disputes. The impact on exports, particularly halloumi, electrical machinery, and cocoa preparations, could have a ripple effect on the domestic economy, affecting sectors such as tourism and domestic consumption. It is crucial for Cyprus to manage the foreign exchange risk and explore new markets to maintain its economic stability and growth.