US-Japan trade deal signals risk for Ireland and the EU

Irish Post

25-07-2025

THE United States' recent trade deal with Japan may be seen as a political success in Washington, but for Ireland and the EU, it's a major shift in global trade dynamics.
The agreement introduces a 15% tariff on Japanese exports to the US, replacing a previously threatened 25% tariff on cars.
While that appears to offer Japan temporary relief, it still marks a harsh rollback of more than a decade of progress on global trade cooperation.
For Ireland, a small, open economy heavily dependent on international trade, especially with America, the implications are serious.
The food and drink sectors are especially at risk.
Exports like butter and whiskey could become less competitive if slapped with steep US tariffs, especially when compared to similar products from Northern Ireland or Britain, which already secured a more lenient 10% tariff arrangement in an earlier deal.
Though far from perfect, that deal now appears favourable compared to what the EU may soon face.
The European Commission is currently in negotiations with Washington, aiming to avoid a looming 30% tariff the U.S. has threatened to impose from August 1.
In response, the EU has approved a list of countermeasures worth €93 billion in tariffs on US goods, set to take effect on August 7 if no deal is reached.
Ireland's exposure is particularly high.
The Irish government initially flagged €12 billion of imports at risk from inclusion in the EU's countermeasure list.
Following negotiations, this has been trimmed by €2.4 billion, with nearly €1 billion worth of sensitive Irish imports, like pharmaceutical components, being removed.
Thirty specific agri-food products valued at €33 million, including purebred horses, sugar, molasses and some chocolate products, were successfully excluded following intensive lobbying.
Still, this relief is partial at best.
Ireland's pharmaceutical sector, one of its most critical exports to the US, remains vulnerable.
President Trump's vocal focus on drug pricing seems to suggest that pharmaceuticals will become tariff targets.
Additionally, Japan's concession to accept US vehicle safety standards sets a worrying precedent.
It hands regulatory influence to Washington and pressures Europe to follow suit, potentially undermining EU regulatory sovereignty.
The investment dimension of the US-Japan deal adds to EU concern.
The $550 billion in Japanese capital earmarked for US infrastructure represents a massive diversion of resources.
If similar terms were demanded of the EU, Ireland could be forced to channel investment into projects that prioritise US interests.
The EU's previous lack of a unified response to US tariffs has only emboldened the current American administration.
When the US imposed a blanket 10% tariff on numerous countries earlier this year, the EU's limited and fragmented reaction did little to deter further measures.
As a result, the US continues to apply pressure on major economies individually, knowing few are willing to risk short-term economic pain in defence of long-term principles.
Simon Harris, Ireland's Tánaiste and Minister for Foreign Affairs and Trade, emphasised that while Ireland supports reaching a negotiated deal, it is also crucial to prepare credible countermeasures to protect EU interests.
'This is not escalatory,' Harris noted. 'It's a continuation of our calm, measured preparation.'
However, the risks remain severe.
Seamus Coffey, chairperson of the Irish Fiscal Advisory Council, has warned of major uncertainty in the lead-up to the tariff deadline.
He noted that Irish companies, especially pharmaceuticals, are pausing investments, in anticipation of potential disruption.
While some diversification of supply chains is underway, the short timeframe limits effective risk mitigation.
Ireland's limited leverage in global trade negotiations, coupled with its deep reliance on US trade, makes it particularly susceptible to shifting tides.