The trade war unleashed by US President Donald Trump has made the European Union one of its victims: a 20% tariff has been imposed on thousands of products, including Spanish olive oil, a key export product. The US is one of the largest buyers of Spanish “liquid gold”, second only to Italy. Last year, olive oil exports to the US reached 110,000 tons worth €1.013 billion, accounting for 16.4% of all exports.
Olive Oil Price Fall
The industry has reacted sharply to the new tariffs, calling them “very bad news” and demanding that they be lifted. For now, the tariff has been set at 10%, pending the outcome of negotiations between Washington and Brussels. This is not the first time that tariffs have been imposed on olive oil: in 2019, similar measures taken in the context of the Airbus-Boeing dispute led to an 80% drop in exports.
However, experts believe that the American market, focused on quality and the Mediterranean diet, will not give up Spanish oil in the short term. According to Juan Luis Avila of COAG and economist Juan Vilar, the American consumer is unlikely to feel the effects of the new tariff: prices in Spain have fallen by half, but this has not yet affected the retail price in the US.
Today, the wholesale price of olive oil is around 3.50 euros per kilogram - a year ago it exceeded 9 euros due to the drought. Thanks to this reduction, even taking into account the new tariff, consumers in the US will be able to buy Spanish oil for 46% less than six months ago.
Risks for the international market
The Spanish association Asoliva expresses concerns that the new tariffs will create a "serious distortion" in the global market. Spain is at a disadvantage: for it, the duty is 20%, while for other supplier countries, such as Tunisia, it is only 10%.
Asoliva CEO Rafael Pico notes that Turkey, which has become the second largest olive oil producer after Spain, can strengthen its position in the US market due to lower costs. However, Professor Vilar is confident that Turkey will face restrictions on exports to the EU and the US, including mandatory VAT.
The US depends on olive oil imports
Domestic olive oil production in the US covers only 3% of domestic demand - about 15,000 tons out of 360,000 tons consumed. The main suppliers - Spain, Italy, Tunisia and Turkey - provide 86% of the volume. At the same time, according to COAG representatives, expanding domestic production in the US is unlikely: olive trees grow slowly, and in California, more profitable crops are preferred.
Search for new markets
To support the affected industries, the Spanish government is allocating 14.1 billion euros. One of the goals is to actively search for alternative markets. Economy Minister Carlos Cuerpo said that opening up Mercosur markets could increase wine and olive oil exports by 40-50%.
However, analysts warn that there are no alternative markets yet that could replace the US. Rafael Pico reminds us that Spanish olive oil is already present in 198 countries, and there will be no immediate replacement.
COAG believes that Central Europe, where olive oil consumption is still low, but there is potential for growth, could be a promising direction.
Negotiations as a Key
Experts agree that olive oil will remain in demand in the US, despite the tariffs. Over the next 90 days, the parties will try to reach an agreement to minimize the impact on the strategic product of Spanish exports.
Consequences of a possible olive oil embargo
Olive oil occupies an important place in the global food industry, and Spain is its largest producer. Let's imagine that Spain has imposed an embargo on olive oil exports to the US and other countries. What will happen next?
Price surge and shortage
Already in the first year, olive oil prices in the US will increase by 50-100%. The cost of a bottle that cost $10 yesterday may reach $15-20. After two or three years, prices will partially stabilize, but will not return to previous levels.
Development of local production
The US will respond by large-scale development of its own production. California, Texas and Arizona are ideal for growing olives, and investments in these regions will increase sharply. In 5 years, American olive oil will occupy 15-20% of the domestic market.
If Spain suddenly issued an ultimatum to refuse to supply olive oil to the US, and other countries (Italy, Tunisia, Turkey, etc.) joined the embargo, the consequences would be very noticeable, and here is what would most likely happen:
1. A sharp shortage of olive oil in the US
- The US produces only about 3% of its own olive oil consumption.
- The remaining 97% comes from imports, and most of it comes from Europe and North Africa.
- Without imports, the market would quickly become empty: store shelves would be empty, and existing stocks would quickly be bought up.
2. A sharp rise in prices
- Olive oil prices in the US could skyrocket due to the shortage.
- Even if domestic production or alternatives appear, they will not cover the shortage in the short term.
- Olive oil will become a premium product, available only to wealthy consumers.
3. Reorientation of consumption
- The market will start looking for substitutes: sunflower, canola, avocado oils.
- Consumers will switch to cheaper alternatives, and demand for olive oil will fall sharply.
4. Problems for the restaurant business
- Restaurants, especially those working in the Mediterranean cuisine format, will experience a strong blow.
- Costs will rise, the menu will change, the quality of the dishes will suffer.
5. Domestic political pressure in the US
- Importers, retailers, farmer associations and consumers will begin to pressure the government to resolve the situation.
- Political scandals and trade concessions in other sectors are possible.
6. Search for new suppliers
- The US may try to urgently increase supplies from:
- South America (e.g. Argentina, Chile)
- Australia
- Morocco
- But it will not be possible to quickly replace experienced European producers.
7. Long-term consequences
- Domestic olive oil production in the US (e.g. California) may begin to grow, but it will take years, because:
- Olive trees give a good harvest only after 5-7 years.
- Investments in plantations are risky and expensive.
8. Losses for Spain too
- Spain will also lose: the US is one of the largest markets.
- Will have to reorient exports to Europe, Mercosur, Asia or the Middle East.
- A temporary collapse of prices is possible on the Spanish domestic market due to an oversupply of products.
Causes and Effects
Month 1–2:
🔹 Shock and uncertainty
- A sharp jump in olive oil prices in stores (+30–50% almost immediately).
- Importers and chains are in a panic: selling off old stocks, looking for urgent alternatives.
- The media are starting to actively discuss the problem.
- Bars, restaurants, small food producers are in shock: costs are rising sharply.
Month 3–4:
🔹 Shortage on the shelves
- Store shelves are empty.
- Olive oil is sold in limited quantities - for example, "no more than 1 bottle per customer".
- A boom in sunflower, canola and avocado oils begins.
- Restaurants are rewriting their menus: eliminating expensive dishes with olive oil.
Month 5–6:
🔹 Switching to substitutes and growing discontent
- Most of the middle class is giving up olive oil.
- Retailers are sharply increasing orders for other oils, for example, from Canada or South America.
- Political pressure is increasing: consumers are demanding that the government solve the problem.
Month 7–9:
🔹 Importing new oils and first attempts to establish domestic production
- Alternative suppliers from Chile, Morocco and Australia are entering the market en masse.
- However, this is expensive: the new oils are inferior in taste and quality.
- Large agribusinesses are announcing large-scale investments in planting olive trees in the United States (especially in California).
Month 10–12:
🔹 Stabilization at a new level
- Olive oil prices stabilize at +200–300% of the "pre-interruption" time.
- People get used to substitution: canola and avocado are becoming fashionable.
- Restaurants are massively redesigning their recipes.
- Olive oil is becoming an elite niche product — like truffle oil now, for example.
Possible consequences of the embargo
If Spain imposes an embargo on olive oil exports, the profitability of production for substitute countries and even for Spain itself will change dramatically.
Important input:
- Spain currently produces about 40% of the world's olive oil.
- Main alternative producers: Italy, Greece, Tunisia, Turkey, Morocco, Chile, Australia, USA (California).
- Olive oil is a premium product with a rather inelastic demand (consumers are reluctant to give it up even if the price rises).
Growth in production profitability:
| Scenario | Increase in olive oil price | Increase in production profitability |
|---|---|---|
| Light embargo (exclusively USA) | +30–50% | +20–40% |
| Hard embargo (USA + allies) | +80–150% | +60–120% |
| Global embargo (almost all exports stopped) | +200–300% | +150–250% |
How it works:
- For Spain: *They can sell oil only within the country or to "friendly" markets → surplus → local price decline possible within Spain. But if supplies are directed correctly (for example, to China, India, Latin American countries), the profitability for producers can grow by 30–50% due to new prices and deficit in the world.
- For other producing countries: In Italy, Greece, Tunisia, Turkey, the profitability can double or triple. They will quickly take over the vacated markets of the USA, Canada, Japan and other Western countries, and at higher prices.
- For new players: The USA, Chile, Australia, Morocco can sharply increase their production — if they succeed, their profitability will grow colossally (+200% and higher in 3–5 years).
Final conclusion: 🚀 The profitability of olive oil production in the world can increase by 1.5-3 times, depending on the scale of the embargo. 🚨 But Spain itself risks losing part of its income, if it does not find a place to quickly sell its oil outside the US and Europe.