There's one scenario in which tariffs won't be a disaster for Ireland

Irish Times

3 days ago

I have enough grey hairs to remember trade deals being done in the past, notably the massive
Uruguay round
of talks which concluded in 1994 and was – though we didn't know it at the time – the high point of a long postwar drive to free world trade and reduce tariffs. The media spent many hours outside meeting rooms as negotiators from more than 120 countries went through complex line-by-line negotiations to cut tariffs and trade barriers.
For Ireland, it was always a case of trading off the potential gains for industry with the threat to farmers. But over time, the State was a huge winner.
The world had already started to move away from the relentless globalisation drive which had lasted well into this century. And now we have
Trump's new world order
and trade 'deals' which are a mix of reality, spin and fudge.
We still do not know the full details of the deal between the
United States
and the
European Union
– before we even start to worry about how Trump might try to rewrite it.
Ibec
chief economist Gerard Brady calculates that exporters accounting for about 10 per cent of our export value to the US now know their
tariff
and another 10-15 per cent await news on exemptions from tariffs being negotiated between the US and the EU. The remaining 75 per cent or so of pharma and semiconductor exporters will have to wait for separate investigations now under way in the Trump administration.
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There is a potential outcome from all this which, while damaging, would not be disastrous for Ireland in the short term. There will be problems, but the economy could adjust and adapt. While the
Department of Finance estimates
that the tariffs could lead to employment being 70,000 lower in five years' time and the economy 1.5 per cent smaller are, at best, a rough guesstimate, they do look to be in the right direction. On current trends, this would mean growth continuing, just not as quickly as it would have.
We can assess the potential damage for Ireland only when we know the full details. The
spirits and whiskey sectors
look exposed, for example, as the US says it is a target for the 15 per cent tariffs. As this is a big issue in France, there will be an EU push in the week ahead, before final details of the deal with the US are published, to try to lower the burden here.
As well as the impact on Ireland, this is one to watch at political level in the EU, as France puts pressure on
Ursula von der Leyen
's
European Commission
, which negotiates on behalf of the EU. As butter, another vital Irish export, was already subject to a tariff of about 16-17 per cent (which will remain), things will at least not get any worse here.
If we want to identify problem areas, smaller companies reliant on the US in a range of sectors is one. Small may no longer be beautiful in a complex and politically-driven world market. And it is also worth focusing on the risks to parts of rural Ireland – as highlighted by
Chambers Ireland
chief executive Ian Talbot – particularly those reliant on sectors such as food and also
pharma
and medical products. Towns such as Westport and Kinsale will anxiously await details on the pharma tariffs.
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EU-US trade deal analysis: Tariffs have a price for both sides. Trump was willing to pay it
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And here things remain a bit woolly, largely because the US president is undertaking study of this sector under
a so-called section 232 process
– referring to a section of a 1960s US act. This is separate from the big so-called reciprocal tariffs announced on Friday.
The EU view is that its deal caps tariffs on pharma at 15 per cent – including any outcome from this separate process. If this holds, the sector at least knows its maximum charge. A big report – due shortly – has been drawn up for Trump under section 232, which looks at national security issues from trade and how more of the supply chain of key products can be brought back to the US from countries such as Ireland. Let's hope Trump does not revisit the 15 per cent maximum tariff figure as part of this.
Tariffs are only one of Trump's policies options. On Thursday,
he issued a letter to 17 of the big pharma companies
demanding they cut prices in the US to the lowest level applying elsewhere. As a big buyer of pharma, the US state machinery has a lot of power here. Imposing high tariffs appears to run counter to the drive for lower prices. So the interaction between Trump and big pharma is another key thing to watch in the weeks ahead.
What we do know is that the US president is determined to return pharma investment to the US and get better prices for American consumers. For Ireland, the initial impact may be slow enough to emerge. But this is likely to mean somewhat lower investment by pharma here in the years ahead and a sector which may be more focused on EU and other markets rather than exporting back to the US. Changes in the pricing and accounting practices of the multinationals – now designed to report massive profits in low-tax Ireland – are also likely to cut corporate tax revenue here.
Like the rest of the economy, the Irish pharma sector will adjust. But there will be a cost, the scale of which depends on the extent of US policy action.
The longer-term strategic questions will take time to clarify themselves. A major issue is whether Trump's policy direction will stick. If you are, say, a big pharma company, do you base your investments on an expectation that this is now the new world, or that Trump's policies will, in time, be rolled back either by him or by his successor?
US court challenges to his powers to impose wide-scale tariffs are only now playing out. US consumer prices are surely set to rise – the only question is how much and whether there will be a cost in jobs. And the financial market calm could be upset at any time, given the crazy and risky course on which Trump has embarked. On Friday, they were already looking jumpy.
So the uncertainty will roll on. Ireland should get through the first wave of this, albeit with some collateral damage. But the big question is our place in a world which seems to be breaking up into new trading blocs and alliances. And whether the valuable certainty which a final, agreed trade deal might bring can last - Ireland and Europe now needs Trump to direct his attention elsewhere.