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Trump tariffs: Full impact on Ireland will depend on areas targeted

Stringent tariffs against Canada, Mexico and China could mark beginning of global trade war

President Donald Trump has referred to the trade imbalance between the US and many other countries, as well as his ‘America First’ philosophy’. Photograph: Brian Lawless/PA Wire
President Donald Trump has referred to the trade imbalance between the US and many other countries, as well as his ‘America First’ philosophy’. Photograph: Brian Lawless/PA Wire
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Harry McGee
Tue Mar 04 2025 - 13:03

On March 12th, the same day as Micheál Martin visits the White House, a United States tariff on imported steel and aluminium from every country in the world will kick in.

After the commencement of stringent tariffs against Canada, Mexico and China this week, it will mark the beginning of what could shape out to be a global trade war, with the European Union drawn in for the first time.

The EU has vowed that it will take retaliatory measures against any tariffs imposed on its goods and services being exported to the US.

A tariff is a simple device that imposes a tax on foreign goods as they enter the country. The percentage is levied against the value of the goods. It is often a protectionist measure, putting up a barrier to protect domestic producers against foreign competitors that might undercut their produce. President Donald Trump has also referred to the trade imbalance between the US and many other countries, as well as his ‘America irst’ philosophy’.

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The previous Trump administration imposed tariffs on steel and aluminium and on Chinese imports. The policy impacted negatively on US competitiveness but there were some upsides. Many commentators are of the view that the wide-ranging tariffs now being proposed will lead to rising prices in the US, in an economy already grappling to bring down inflation. President Trump’s victory in the November election was partly attributed to him being more trusted to bring down the cost-of-living.

The renowned investment guru Warren Buffett said that tariffs could contribute to inflation and also impact consumers.

“Tariffs are ... an act of war, to some degree,” said Mr Buffett. “They are a tax on goods. I mean, the tooth fairy doesn’t pay them.”

The impact on Ireland will depend on the shape of the tariffs that are imposed here. If it is confined to steel and aluminium – as well as car manufacturing, another area identified by the president – it will have a minimal impact.

However, the president has also mentioned pharmaceuticals. If there is a tariff imposed by the US administration on that sector, and on medical devices and technology, it could lead to the imposition of punitive taxes on the exports of these goods to the US.

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Ireland exported €72 billion worth of goods to the US in 2024, of which €58 billion was composed of pharmaceuticals and chemicals. On the face of it, Ireland has an enormous trade surplus with the US and it makes the State a potential target for tariffs.

However, as economist Jim O’Leary noted in a recent LinkedIn post, the trade surplus for goods is more than offset by Ireland’s deficit on services with the US, which is about €134 billion.

Rather than being in surplus he wrote, “the most comprehensive measure of our trade balance with the US, the balance of trade in goods and services, was in deficit to the tune of over €100 billion.

“It is also worth pointing out that the surplus on goods account and the deficit on services account are intimately and inextricably linked and one cannot be looked at independently of the other.

“For example, US firms located in Ireland export very large quantities of pharmaceuticals to the US, but the same firms make large royalty and license payments, as well as payments for R & D and other business-related services, to their US parents. All such payments constitute imports of services.”

Mr O’Leary argued that the Irish Government and its trade emissaries would need to argue that point very strongly in its contacts with the administration.

The underlying reasons behind ‘America first’ is a desire on Trump’s part to coerce American companies to manufacture primarily in the US and for American companies to pay their taxes in the US and not elsewhere.

To that end, his administration has also criticised digital service taxes which it claims is affecting US companies, by reducing their profits. It has specifically named the UK, France, Italy, Spain, Turkey, Austria and Canada. But not Ireland as yet. The US has also announced its withdrawal from the global corporate tax agreement which was agreed under the umbrella of the Organisation for Economic Co-operation and Development (OECD). That could introduce doubts about the future of the corporation tax rate in this State. It has been a bedrock of Irish FDI policy for over a quarter of a century.

The Irish Government has been involved in pre-emptive contingency planning in the event of adverse US actions directed at the EU and against Ireland. Already it has announced a new group named the Strategic Economic Advisory Panel which will be based in the US with a twin mandate of strengthening Irish-American trade relations and also responding to adverse policy decisions made by the Trump administration.

Simon Harris is also set to ask Cabinet to approve the immediate establishment of a separate Consultative Group on International Trade Policy to facilitate dialogue with key stakeholders engaged in international trade. This group is to meet at least every eight weeks, and it will provide advice on dealing with trade challenges and opportunities.