Trade war with the USA on the horizon: what do the new tariffs mean for Norway?

Norwegian Finance Minister Jens Stoltenberg said that the tariff increases in the USA are bad news for the global economy and for a country as open as Norway, and that Trump's decision will impact Norwegian companies. Although it is too early to assess how serious the situation will be, representatives from several sectors have already begun to speculate.

8 percent of Norwegian exports currently go to the United States, but most go to the EU. The United States remains Norway's third-largest export market. How will the increased tariff on goods from Norway translate into reality?

– Now it is important that we continue working on the negotiations regarding the European Economic Area Agreement, introduce possible EU protectionist measures, and keep the Norwegian economy in check – said Stoltenberg.

The new regulations cover almost all countries in the world – a minimum rate of 10 percent tariff is set for each country, and for many partners, the tariff rate is higher. For China, the tariff is set at 34 percent, for the European Union 20 percent, for Japan 24 percent, and for a number of other countries, the rates reach up to 30-50 percent.

It is important to note that the additional 15 percent tariff is imposed on top of the existing tariff rates from the US tariff schedule or anti-dumping duties. In other words, this means an increase in the cost of Norwegian exports by 15 percentage points if the product is not subject to separate customs measures.

Many companies are uncertain about how severe the announced trade tariffs will be and whether Norway will experience any reaction from the EU. A White House document dated April 4 states that the new tariff rate against Norway is 15 percent. Increased tariffs and a global trade war could create a vicious spiral that hits most people where it hurts the most – in their wallets.

For example, salmon farmers fear a drop in demand – an additional 15 percent tariff may force an increase in fish prices in the USA, which will discourage some buyers. Experts point out that with a 15 percent increase in the price of imported fish, demand will fall, and sales of Norwegian food may slow down. Similar concerns are held by producers of aluminum and metals – their products were already less competitive due to previous tariffs, and a global tariff war could lower metal prices worldwide, affecting Norwegian exporters.

Machine suppliers to the industry also fear that American customers will choose cheaper local suppliers or forgo some orders if Norwegian machines become more expensive by several percent. These threats translate into a real risk of revenue loss.

The most important export goods from Norway are oil, gas, and seafood, but also aluminum, chemical products, machinery, and technology. Jobs in the responsible sectors will naturally be at risk of losing value.

– The worst that can happen to Norway is that this develops into a global trade war and a sharp decline in international trade – says NTB professor Ola H. Grytten from the Norwegian School of Economics.

He points out several aspects that in the long run may have negative consequences for most people and their wallets: price increases worldwide will affect Norway and put pressure on price increases also in the fjord country; rising inflation will prompt Norges Bank to raise the main interest rate; export companies will be subjected to greater pressure, which will be associated with an increased risk of job losses.

The list of products subject to a 15 percent tariff from Norway is not specifically listed – the tariff is general. Norway does not have a special bilateral trade agreement with the USA (like the USMCA covering Canada and Mexico), so standard tariffs apply. In practice, many Norwegian industrial products have so far entered the USA with low or no tariffs (such as machinery or electronics), while, for example, agricultural products have encountered high tariffs or even non-tariff barriers. Now an additional 15 percent will be added to each of these positions.

The effects of the trade war may in the longer term – perhaps a year – spread to the entire Norwegian economy. Grytten emphasizes that this may affect central elements of the Norwegian social model. – If a trade war breaks out, it may lead to less adaptability, lower productivity growth, lower economic growth – and thus less prosperity – he says.

Although the consequences for parts of the export industry may be drastic, the direct impact on the Norwegian economy will initially be limited. However, Trump's tariff and trade policy has and may have a number of indirect and far-reaching effects that together may prove difficult to manage.

– A large part of the goods and services we produce is part of value chains that also include European industry. A large part of our production is sent through the EU, and before further dispatch, we receive an EU stamp. Therefore, we are also affected – emphasizes Minister of Trade and Industry Cecilie Myrseth. – For us, Europe is now the most important – she emphasizes.

Steel and aluminum, as well as cars and car parts, were among others exempted from the new tariffs – these categories were already earlier (before the announcement of the 15 percent tariff) subject to separate protective tariffs of 25 percent. The list of exceptions also included medicines, semiconductors, energy raw materials, and some minerals that are not available in the USA. This is to prevent negative effects for the American industry resulting from the increase in costs of key components and raw materials.

Many Poles are employed in industries crucial to the Norwegian economy: construction, shipbuilding and petrochemical industry, transport, fishing, or the energy sector. The export crisis may affect the situation of Polish workers in Norway.

Events such as trade wars strongly affect currency markets. The Norwegian krone was already weakened against major currencies before the tariffs were imposed. For Poles working in Norway, the NOK exchange rate is important – it determines the real value of earnings after conversion to zlotys.

Export-oriented companies may halt new recruitments until the situation stabilizes. Manufacturing and logistics companies that previously eagerly hired additional workers (often foreigners) may now limit overtime or not renew temporary contracts. In the fishery sector, caution is already visible – salmon processing plants are considering whether to maintain the current employment level for the summer season. The same may apply to parts factories or technology companies working on export orders.

The risk of layoffs primarily affects less protected groups of workers. If the situation worsens, there may be talk of non-renewal of contracts or even reduction of positions in companies affected by the tariffs. In conditions of slowdown, companies also less frequently decide on salary increases.

For now, the macroeconomic effects of US President Donald Trump's decision on Norwegian soil are difficult to estimate. Norges Bank had already warned earlier that prolonged trade tensions could keep inflation at an elevated level, delaying planned interest rate cuts.

The government fears a 'triple squeeze' – first, American tariff barriers halt Norwegian exports, then EU counter-reactions indirectly hit Norwegian exporters, and finally, a global slowdown reduces demand for raw materials and products from Norway. Finance Minister Jens Stoltenberg described such a scenario as a 'triple squeeze,' which could threaten the economic growth of the fjord country.

In Norway's interest, it is rather to mitigate the conflict than to escalate it, because a tariff war between the two largest powers (USA and EU) will most harm third countries like Norway. Instead of imposing its own tariffs on American products (which could hit Norwegian consumers and importers), Norway focuses on trade diplomacy – consulting with the European Union, considering joint actions in the WTO, and seeking possible sectoral exemptions.

Sources: borsen.dagbladet.no, NTB, E24, SSB, Reuters, nationen.no, innovasjonnorge.no, NRK, MojaNorwegia.pl, TVN 24