The phrase “the dirty dozen” entered the popular lexicon after the 1967 war movie starring Lee Marvin. Now the US is promising “the dirty 15” which, while less catchy from an alliteration point of view, may yet become another household phrase.
In 11 days’ , the Trump administration is due to announce the next phase of its tariffs plan and this, we are told, will focus on “the dirty 15” countries which the US feels has dealt with it most unfairly – and will thus be subject to the highest tariffs.
Ireland may well be on the list. And if not then the European Union as a whole certainly will be. Either way, as the country which is the biggest contributor to the US trade deficit in goods with the EU, Ireland will be singled out. And Ireland’s corporation taxation system is also under the microscope, with US commerce secretary Howard Lutnik on Friday night referring to the Irish “tax scam”.
As the State has done so well economically in recent years, and the rest of the EU has long been critical of Irish corporation tax policies which have helped this to happen, we can’t expect too much sympathy from other European capitals for our particularly exposed position. Recent tensions on defence will not help either. This may all count in the negotiations to come, particularly as the EU decides how to respond to Trump’s tariffs with Ireland potentially exposed by some of the options.
The dirty 15 idea was unveiled by US treasury secretary Scott Bessent this week and is due to form part of an important announcement on April 2nd – the “big one” as Donald Trump calls it.
The list will form the basis of what Trump calls reciprocal tariffs, due to apply on all imports from the countries identified. Special tariffs on pharmaceuticals and semiconductors are promised as well; a figure of 25 per cent has been mentioned here.
Of course, what exactly emerges – and, crucially, how long this tariff madness might last – remains unclear. The story could change again before April 2nd.
And no one is sure whether we are heading for short-term disruption, long-term change or a bit of both. There is a real possibility that disruption to the US economy could change Trump’s direction. His big gambit to reorder world trade in the US’s advantage is, in reality, more likely to collapse the markets and turn into an unworkable mess.
The large exports of US pharma companies from Ireland back to the American market will be one of the main items in focus
But for now the US president is determined to push ahead. Bessent has said the US will identify the countries which have the highest trade barriers against the US – and this includes not only tariffs these countries have on US imports, which are not hugely significant in the case of Europe, but also other perceived barriers in areas like regulations and, in the EU’s case, the VAT regime.
The US will calculate the costs of all this to American exporters and present a “number” to each country. This is the proposed US tariff on all their imports into the US. And then negotiations start and countries have a chance to cut their tariff if they play ball.
There is a vital question for Ireland here: will Trump decide to divide and conquer EU countries by giving a different “number” to each country or deal with the EU as a whole? If he goes country by country, then Ireland – with the highest trade surplus with the US among all EU countries – will surely be picked out for special mention.
Trump could threaten varying tariffs levels on different EU countries, even if the EU is one trade bloc, which means that actually implementing this would be messy. But, initially at least, this is all about show business and putting countries under pressure, rather than technical considerations – and you could see how Trump could use all this to try to drive a wedge between different EU countries and find different reasons why some are “worse” than others.
Either way, when the EU and the US come to discuss how to reduce the goods trade deficit, then the large exports of US pharma companies from Ireland back to the American market will be one of the main items in focus. As this is based largely on deals done within these big pharma companies – as one arm sells to another – then a solution is not easily found.
The firms may be pushed by Trump to declare more profit in the US, hitting Ireland’s corporate tax take. In Friday’s comments, Lutnik said the location of intellectual property by the big tech and pharma companies in Ireland - the key to their declaration of large profits here - had to end. This again underlines the threat of Ireland being singled out in the Trump tariff plan.
It also points to another risk; in a separate study which Trump has ordered, he is threatening to use 90 year-old legislation to double taxes on the US operations of companies from countries seen to have discriminated in the tax field against US companies. This could leave some Irish companies with a big US presence exposed.
While Ireland may be singled out by Trump in his tariffs campaign, the response will be driven by what is agreed at EU level. This makes the economic diplomacy for Ireland potentially complicated, with Brussels deciding on an EU response, but each member state trying to look after its own back yard and having its own contacts with Washington.
The latest report from the Economic and Social Research Institute (ESRI) shows the channels through which this could feed through to the Irish economy – a hit to exports from multinationals and domestic companies, a loss of well-paid jobs, a knock-on reduction in overall spending hitting the wider economy and a hit to the public finances. In the short-term, the crippling uncertainty facing businesses will take an economic toll; plans will be put on hold as companies wait to see what happens.
Two issues make all this hard to capture in an economic model, or for the Government to come up with a plan to respond. First, we don’t know the extent of the tariffs. Many firms might adjust over time to relatively low tariff levels – there is a big difference between a 10 per cent tariff and a 100 per cent one. Or a 200 per cent one as threatened by Trump on EU drink exports to the US, which would wipe out Irish spirits trade there if sustained for any period
Second, the duration of all this is the really crunch issue – and will be central to the policy response. If this trade war goes on for any length of time, then – as well as the risk to exports – the danger of much lower investment levels for foreign and domestic companies could be the real long-term economic cost to Ireland.
It is Ireland’s recent success – and particularly the surge in inward pharma investment over the past decade – that has the State at risk of being singled out. This, at least, has left the exchequer with significant financial reserves to try to ride out the initial phase of whatever is on the way.
But make no mistake, Ireland will be a central player in the Trump tariffs gameshow, which is about to go live. And the jeopardy will be real.
