Consumers face paying up to 50 per cent more for goods from the United States while businesses could see the cost of imported raw materials rising by a similar rate should a looming transatlantic trade war go ahead, the Irish Exporters Association (IEA) has warned.

With the US and Europe squaring up in a €4 billion dispute over rebates that Washington grants to exporters, the Republic risks being squeezed between the feuding trade blocks, according to the IEA.

The result could be a substantial increase in the cost of consumer products such as computers and fruit juices and in raw materials imported from the US by the IT and pharmaceuticals sectors, it said.

The European Commission has said it is prepared to apply duties of $4 billion (€3.3 billion) on US imports, unless Washington bows to World Trade Organisation pressure and drops the rebate scheme. Tariffs will be levied from March 2004, initially at a 5 per cent rate but climbing to 17 per cent within a year unless the US relents.