Why Ireland has the most to fear from Trump's trade war

Yahoo

08-04-2025

No other country in the EU fears Donald Trump's tariffs and the consequences of his global trade war more than Ireland.
Officials in Dublin face a perfect storm of threats to the economy and employment in a country that is particularly exposed to headwinds from Washington.
Ireland depends on the US for goods and services, with exports and tech making up a fifth of its GDP.
About 11 per cent of Irish workers are employed by mostly US-owned multinationals in the pharmaceutical and technology sectors, which were attracted by the low corporate tax rate.
In recent years Ireland has successfully navigated the choppy waters of the financial crisis, its bailout, Brexit and the Covid pandemic.
It has emerged with a record budget surplus and the healthiest public finances in Europe.
The five million-strong country has long punched above its weight thanks to a canny mix of soft power, a smooth diplomatic machine and influential friends in Washington and Brussels.
But this latest crisis threatens to leave Ireland and its people much poorer.
'This is without question the most serious issue to face the Irish economy in a long time,' Taoiseach Micheál Martin told Ireland's parliament.
It is, according to the Irish Times, 'a genuine, keep-people-awake-at-night, present-the-government-with-appalling-alternatives-crisis'.
Dublin has traditionally enjoyed a close relationship with the White House.
However, its large trade surplus with the US, which reached a record €50 billion (£41.8 billion) in 2024, put it firmly in the Trump administration's firing line.
Ireland had a much larger deficit of about £115 billion in services with the US in 2023.
This was because of US companies importing valuable intellectual property and royalties, but Mr Trump's trade wars are focused on goods deficits.
Apart from the EU, the US is Ireland's largest export market.
Irish goods exports to the US were worth £62 billion in 2024, an increase of 9 per cent from 2023, and about a third of its overall total exports of £191.2 billion.
Many of those exports now face Mr Trump's 20 per cent tariff on the EU. This means American companies buying Irish products must pay more.
They can decide whether to absorb the cost or, more likely, pass them on to consumers, which will make Irish products more expensive and less competitive on the US market.
It is estimated that tariffs could cost more than £15 billion in lost trade.
Irish butter and whiskey will become more expensive in the US, which is Ireland's second biggest agri-food market and where about 11 per cent of Irish food and drink exports goes across the Atlantic.
Every year, Ireland exports agri-food worth £1.67 billion to the US. About £709 million of that is dairy and £768.9 million is drinks, mostly whiskey.
Pigmeat (about £19.7 million), beef (£7.5 million) and seafood (£3.25 million) make up the remaining 9 per cent of exports, according to the Irish Farmers' Association .
Of the 59,000 tonnes of EU butter exported to the US, 51,000 tonnes of it was Irish.
Kerrygold is now the second best selling butter brand in the US. It began selling to the US in the 1990s but Ireland's RTE broadcaster suggests the price of a standard 454g pack could jump above $10 (£8) a pack once the tariffs kick in.
A pack costs $9.79 in Target but that could rise to $11.45 (£8.94). A pack the same size costs about £4.69 in Ireland and a 250g pack costs £3 in Waitrose in the UK.
The Irish Whiskey Association warned that the impact of tariffs would be immediate.
'The US has been the engine of growth for Irish whiskey and spirits, and now represents 41 per cent of Irish drinks exports every year,' it said.
'The total value of the US market for the Irish drinks sector is €865 million (£740 million) per annum.'
Irish whiskeys will also face more competition from Northern Ireland's whiskeys, such as Bushmills, which will be subject to the lower UK tariff of 10 per cent.
Producers will also be nervous of Mr Trump's threat to slap EU exports of alcoholic drinks with a 200 per cent tax if Brussels targets Kentucky bourbon in its retaliatory tariffs.
After a meeting of EU foreign ministers on Monday, it was reported that bourbon had been struck from a Brussels hit list of American products in a victory for Ireland, as well as France and Italy who were looking to protect wine exports.
The world's 10 largest drugmakers, including US companies Johnson & Johnson, Pfizer and Merck, all have large plants in Ireland and pharmaceuticals are a driver of Irish exports.
About 45,000 people are employed in the country's pharmaceutical sector, with exports to the US worth about £50 billion a year.
Mr Trump wants to onshore those manufacturing jobs to the US.
There were unrealised fears he would bring forward a pharma-specific tariff of 25 per cent on 'Liberation Day'. But Dublin is anxious that it is only a matter of time before that happens.
'Ireland has our pharmaceutical companies, this beautiful island of five million people has got the entire US pharmaceutical industry in its grasp,' Mr Trump said when meeting with Mr Martin in March.
US tech giants including Google, Apple, Microsoft, Facebook-owner Meta and Elon Musk's X have their European headquarters in Ireland.
Large multinationals have onshored their valuable intellectual property assets to Ireland, and to take advantage of Ireland's low corporate tax rate.
In 2024, Apple lost a legal battle against an EU order to pay Ireland almost £12 billion in back taxes. Dublin took Apple's side in the court case, which followed an EU crackdown on sweetheart tax deals.
Ireland's fiscal watchdog estimates that 75 per cent of all corporate tax is paid by large US multinationals, with three firms responsible for almost 40 per cent alone.
Mr Trump has pledged to cut the US corporate tax rate to the top Irish rate of 15 per cent, which could sap revenues in Ireland.
He wants to onshore tech jobs as well and could offer incentives for the tech giants to transfer back intellectual property, which would further hit tax revenue.
Tech appears likely to become another battleground between the US and EU. Mr Trump has railed against EU regulation of US tech titans, including large antitrust fines imposed by the European Commission for anti-competitive behaviour and measures to fight disinformation.
France and Germany have called on Brussels to target US tech firms in retaliation for the Trump tariffs.
Ireland, conscious of the risk that poses to a vital part of its economy, is lobbying against that.
EU members outsource trade matters to the European Commission but must agree by a qualified majority to any tariffs that are imposed in response.
Mr Trump's tariffs cause Ireland's new coalition governments problems on the domestic, European and wider international level.
Internationally, the days when Dublin could rely on Joe Biden, the former US president, to have their backs in the face of challenges such as Brexit are over.
Mr Biden was fiercely proud of his Irish roots and a valuable ally, while Mr Trump has shown no inclination to show Dublin any special favours.
In fact, shortly after Mr Martin visited the White House for a St Patrick's Day event, the White House effectively endorsed Conor McGregor to be Ireland's next president.
The MMA fighter, who recently lost a civil rape case, is seen as preferable by some Republicans to Irish establishment politicians who are widely perceived to have gone woke.
In Europe, Ireland must balance defending its national interest in discussion over retaliatory tariffs with a need to show solidarity with other member states.
The government will be keenly aware the EU had its back over Brexit, and won't want to be seen to break ranks.
But at the same time it will press for negotiations with the US and tap the brakes on any EU efforts to target the American tech giants.
Dublin is arguing for a 'firm but proportionate' response from Brussels.
Before elections in 2024, the two main parties in Ireland's coalition government proposed a giveaway budget, partly funded by the Apple windfall, to head off the threat of Left-wing Sinn Fein and draw attention from an endemic housing and healthcare cost crisis.
They also set up a 'rainy day fund' from the budget surplus in anticipation of the trade war and the multiple threats it posed to Irish prosperity and jobs.
Mr Martin has ruled out any immediate extra support for businesses and insists there is still time for negotiations with the US.
Any impact on corporate tax revenue will take time to filter down but will eventually force the Taoiseach to make tough and unpopular decisions on public spending.
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