Donald Trump could hardly have talked up the importance of next Wednesday’s tariff announcement any more, dubbing it America’s “Liberation Day”. What he will announce has big implications for Ireland. Here is how to interpret it all.
1. The build up will be chaotic. As ever in Trumpland, we will be hit with a blizzard of statements, rumour and speculation in the coming days about what will happen. Some believe this is part of a wider Trump strategy to “flood the zone” – dominate the media agenda – and disorientate opponents. Even over the weekend the potential shape of what was going to be announced was far from clear, with reports that Trump was encouraging aides to increase the scale of tariffs on the table, and another suggestions of a possible common tariff on all imports.
More chaos to keep other countries on edge? Or perhaps, there is a simpler explanation. Maybe Trump and his team are not sure what they are doing.
2. The announcement will also be chaotic. It will start late. The US president will drone on about how America has been taken advantage of. But these big Trump events are often light on detail. Imposing tariffs on a whole range of trading partners is a hugely complex task. A real question is whether Trump’s team has the ability to implement this. The risks ahead for the US are immense – higher prices, shortages of goods and upended supply chains. It has all the look of a hastily drawn up, ideologically driven move, rather that a considered, rational plan.
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3. Trump will target Europe - and Ireland is exposed. A clear lesson from the Signal fiasco this week is that in private, as well as in public, Trump’s team hates Europe. The EU expects tariffs of roughly 20 per cent across the board on imports to the US, which would be unprecedented in modern times. But significant uncertainty still surrounds this and the whole shape of the tariff package.
This level of tariffs would have a big impact on EU exports. Ireland is in the firing line, due to its high trade levels with the US. Irish exports to the US are dominated by pharma and by food and drink, such as Kerrygold butter and Irish whiskey. Tariffs of 20 per cent, if sustained for any period, would cause big difficulties for these sectors and have a wider economic cost. Looking at export levels, Ireland is the most exposed EU country in terms of trade, largely due to massive pharma exports.
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A tit-for-tat trade row with the EU could escalate things further. Tariff levels could rise and fall chaotically. Trump has already threatened 200 per cent tariffs on EU drink exports which would price Irish whiskey, gin and cream liqueur out of the US market.
For Ireland there are three distinct dangers. The first is the risk to all exports to the US from blanket tariffs. Second there is the specific risk to the pharma sector which, as well as the blanket or reciprocal tariffs, could be hit with special tariffs. And third there is the unpredictable risks which would come if this turned into a full scale trade war.
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4. The endgame won’t be clear. For Trump, tariffs seen to be some kind of magical cure-all. But does he see them as a short-time negotiating tool - to be removed or cut in return for concessions - or a long-term fundraiser to help pay for tax cuts elsewhere, as he indicated when he introduced car tariffs this week? Or a bit of both? Or does he know?
A key thing to watch will be what specific demands Trump makes of other countries and whether it looks like the worst of the tariffs can be negotiated away over the coming months - or are here to stay. This may take some time to become clear.
5. Pharma will be in the spotlight. This is where Ireland could be one of the countries singled out – last Wednesday Trump again mentioned Ireland as being “very smart” in the way it attracted US pharma companies – and said the US wanted them back. Much remains unclear. There is an expectation that pharma exports to the US will be included in the blanket tariffs announced next week, though we don’t know for sure.
And Trump has also promised special 25 per cent tariffs on pharma, semiconductors and some other key areas in the near future. It is unclear if these special tariffs will be added in full to the general blanket tariffs – or if 25 per cent would be the limit of tariffs on EU pharma exports to the US. No wonder pharma companies are saying little in public and tearing their hair out in private. Tariffs of 25 per cent or more would undermine the business model of selling to the US from EU countries and upend supply chains. There may not be full clarity on this pharma issue this week as any special tariffs may follow later.
The US has a string of complaints about the pharma business – the jobs it creates overseas of key drugs, the high price of drugs in the US and the tiny amounts of tax paid by the big manufacturers in the US. But how they propose to fix this is not clear. Pharma manufacturing plants would take years to relocate. And even moving production from the EU to existing US plants would take time.
Company structures could be changed a bit more quickly to ensure more tax is paid to Washington, DC – and less in countries like Ireland. What the US “ask” is here will be vital. For now, neither the EU nor the companies knows the answer beyond a general view that Trump wants the US market served by American plants.
But the risk of less pharma investment here in the years ahead is real. And so is the possibility that - facing pressure from the US - they declare more profits in the US and less here, hitting Irish tax revenues. As well as tariffs, there are others weapons - such as corporate tax changes or federal purchasing power in the US market - which the US could conceivable use here to try to twist the arm of the pharma giants.
6. The EU will talk tough, but want to negotiate. In reply to Trump, Brussels and EU capitals will promise a “firm” response via tariffs on US imports to the EU. But they will want to avoid a full-scale trade war and to leave space for talking. Interactions have been very testy in recent weeks – what Brussels does not know is whether Washington wants to negotiate in the short term after Wednesday.
7. Ireland will argue against a heavy EU reaction. Ireland is particularly exposed to a full-scale trade war and so serious-faced ministers will call for some restraint in the EU response and for talks with the US. The nature of the EU response is important for Ireland – one option would be to target the business of big US tech companies in the EU, many of them based here. Dublin will try to urge calm, but furious leaders in other EU capitals may think differently. Given Ireland’s exposure to the US, Irish ministers will do whatever they can to dial down tensions.
8. There will be a concerned message for voters. Ministers are already expressing serious worry – and they are right. Anyone who saw Minister for Finance Paschal Donohoe talk about the issue on RTÉ’s Prime Time this week will not have been cheered up. Ireland faces short-term disruption to trade and, potentially, significant longer-term cost to investment, jobs and tax. A vital economic partner is going rogue. The implications, however, will take time to play out.
Already, big companies are – privately – throwing their hands in the air, with little idea of the vital detail, and putting investments on hold. April 2nd, 2025, will be a day we will remember. But in trying to understand its long-term implications we are still looking through a fog.
