SEVILLE, Spain (Reuters) - A Spanish hatmaker warned that a 40-year tradition of supplying felt hats to Orthodox Jews in the U.S. risked becoming a casualty in President Donald Trump's trade war.

The community, which is mainly based in New York and New Jersey, buys around 30,000 hats annually from the 140-year-old Fernandez y Roche Industrias Sombreras Españolas factory in Seville in southern Spain, and in May began paying a 10% tariff on imports for the first time, the factory's Managing Director Abraham Mazuecos told Reuters.

Trump, who has repeatedly criticised the EU for what he says are unfair trade imbalances with the U.S., has also recommended a further 50% tariff for EU goods, but on Sunday agreed to extend the deadline for talks between Washington and the 27-nation bloc for a deal until July 9.

Higher tariffs would be "dramatic" for the hand-made hat factory, since it can't afford to reduce prices for its long-term clients in the U.S. to offset the new fee, Mazuecos said.

"Our margins are tight, so we expect a decline in demand," Mazuecos told Reuters.

The factory supplies 60% of the 100,000 hats bought each year by Orthodox Jews, with half going to the U.S. and the other half to Israel.

Spanish hats account for a fifth of all black felt hats purchased by the Orthodox Jewish community in the U.S., which also imports from Italy and China, Mazuecos said.

The black felt hat, worn daily by Orthodox Jewish men from the age of 13, is typically replaced every three years at a cost of between $120 and $380, he added.

Mazuecos said that U.S. customers could gradually buy fewer hats from abroad and seek U.S. manufacturers that can produce them at lower prices.

"There are hat factories in the United States, but they are highly specialised in cowboy hats," he said.