EU-US deal good for Ireland as it averts trade war for now and gives businesses vital sense of certainty
outline trade deal
between the
EU
and the
US
has one main advantage – it avoids an imminent tariffs war between the two sides which could have got nasty.
US president
Donald Trump
had threatened 30 per cent tariffs on EU imports from August 1st and the EU had drawn up a list of US goods on which it would impose tariffs of its own.
This could have developed into a tit-for-tat battle. Now, the gunfight is off and the trade weapons are back in their holsters, at least for a while.
Ireland relies heavily on US investment and trade and stood to be particularly exposed if a trade war broke out. Such a scenario could risk drawing big digital tech companies with large operations here into the fallout.
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Peace has broken out, but Trump's unpredictable nature means dangers and uncertainties lie ahead. Businesses in most sectors will, for now at least, know what they are dealing with and that has a value it itself, as doubt had started to damage investment.
What about the terms of the deal? The 15 per cent tariff is well above the average of just under 5 per cent which applied on all EU imports to the US before Trump came to office. However, Irish businesses have been faced with a range of different tariff levels and much will depend on the small print of what was agreed.
It is worth remembering that Trump imposed 10 per cent tariffs on top of existing ones after 'Liberation Day' and these remain in place. So, Irish companies will be calculating how the 15 per cent compares to the current position – and also to what applied before Trump came to power.
Indications on Sunday night were that the 15 per cent would be 'all-inclusive' rather than adding to pre-existing tariffs. If that is the case, it would be welcome. While no details have been circulated, the EU said there would be 'zero for zero' deals discussed in some areas. Drinks or agri-food could be in the frame here, which would be positive for Ireland.
One sector which is vital to Ireland is the pharma sector and there was some confusion as to how it would be affected. European Commission president Ursula von der Leyen said this would be covered by the 15 per cent cap on reciprocal tariffs.
However, the Trump administration is examining key sectors like pharma and semiconductors – seen as vital to national security – under a separate process known as the section 232 studies. It may be possible that higher tariffs on EU pharma exports to the US could yet emerge from this.
Trump spoke again on Sunday about his determination to bring pharma investment back home for security reasons. And he has spoken before about the possibility of using tariffs to achieve this. Other policy options would also be open to Trump to try to get pharma firms to relocate away from countries like Ireland. The generally better mood between the EU and US may help in areas like this, but dangers remain for Ireland.
In the wider picture, Trump is building in baseline tariffs of 15 per cent for many countries, with his key goal being to raise revenue for the US exchequer. But this will hit those who rely on imports into the US, too, affecting businesses and consumers and pushing up inflation.
That is the price of tariffs. For now, though, Trump is happy for the US to pay it.
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