What is going on with tariffs?
There is still some confusion and uncertainty. The US has stopped collecting the tariffs judged to be illegal by the US supreme court as of today. This will include tariffs imposed on the European Union (EU) after so-called Liberation Day last April.
These tariffs were 15 per cent on most products – with important exclusions such as pharma. However, they also incorporated other tariffs that the US previously had in place on imports – and it is not clear what is happening to these. For example, agricultural products, such as Irish butter, have been subject to tariffs in the US for many years and it is unclear what is happening to these historical tariffs.
So what happens now?
Trump’s new 15 per cent global tariff – based on a 1974 Act that allows them to stay in place for 150 days – is due to come into place on Tuesday. The EU is concerned that the new regime will breach the terms of the trade agreement reached in outline last summer, but not yet implemented.
The headline tariff rate of 15 per cent under the global tariff is the same as agreed on EU imports to the US under the trade deal. But there are two problems.
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One is that is unclear whether the initial imposition of the new global tariff will be on top of some existing historical tariffs, bringing the rate above 15 per cent. The other problem is that various sectoral exceptions and reliefs were agreed under the trade deal and it is not clear how these will now be handled.
The European Parliament trade committee has decided to delay its approval process until things are clearer. Its chairman, Bernd Lange, has referred to “pure tariff chaos” from the US administration.
In the short term, Asian countries including China will be the biggest winners as they have been subject to tariffs rates well above 15 per cent and these will now fall.
What about Ireland’s pharma exports?
Pharma is one of a small number of sectors excluded from the new global tariffs. So the sector responsible for by far the largest share of Irish exports to the US will remain tariff free, for now anyhow.
Trump has threatened to examine new approaches to raising tariffs, including so-called section 232 investigations where pharma had previously been threatened. This has raised some nerves in Ireland.
But the exclusion of pharma from the new global tariffs shows the sensitivity about drug prices in the US. And Trump has done individual deals with many of the big pharma companies in which there appear to be guarantees of exclusion from tariffs in return for lower prices. Many have also made new investment commitments in the US.
The other sectors excluded are critical minerals, fertilisers and certain agricultural products, while other tariffs on auto and steel imports, on which specific charges have been put, will not increase further.
Is there an obvious way forward?
Both the US and EU sides have said they want to adhere to the trade deal which has been agreed. The fact that the deal is not already in force is a complication. There will be questions now about how to get there and how tariffs will be applied as the EU ratification process proceeds. There is scope here for difficulties and tensions to emerge.
EU leaders will also have to agree a common approach and there are divergent views. Some will favour a strong reaction if the new US tariffs go beyond what was agreed with the EU. Trump’s action also remain unpredictable. A period of some tariff uncertainty thus lies ahead.
