US president Donald Trump has declared next Wednesday “liberation day” when he will unleash the full onslaught of his latest tariffs, the taxes he plans to impose on imports of goods from other countries.
During an Oval Office announcement on Thursday, unveiling plans to set tariffs of 25 per cent on car imports, Trump pledged: “We’re going to take back just some of the money that has been taken from us.”
Warming to the theme, he continued: “They’ve taken so much out of our country, friend and foe, and frankly friend has been often times much worse than foe.”
Then he turned his focus, again, to Ireland. He warned there would be tariffs too on pharmaceuticals “to bring our pharmaceutical industry back”, singling out Ireland, home to manufacturing facilities of many US pharmaceutical companies.
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Trump said the US did not make medicines, adding: “It’s in other countries – largely made in China, a lot of it made in Ireland. Ireland was very smart. We love Ireland. But we are going to have that.”
[ ‘Ireland has our pharma companies,’ says Trump. But what will he do about it?Opens in new window ]
April 2nd is being viewed with dread in Government Buildings and business boardrooms across the State. It could mark the beginning of a full-scale trade war between the European Union and the United States.
“Potentially it’s a date that will go down in Irish economic history – it’s that serious,” said Dan O’Brien, chief economist with the Institute of International and European Affairs (IIEA).
O’Brien has said April 2nd is “shaping up to be worst day in Irish economic history” since the government’s emergency guarantee to save the banking sector in September 2008 and the international bailout in December 2010.
“Immediate effects of tariffs will not be dramatic but longer run impact on Ireland’s economic model could well be more profound than 2008/10,” he said in a post on social media network X.
While acknowledging that “nobody knows what’s coming”, O’Brien told The Irish Times that Wednesday’s tariffs could be historic due to how integrated Ireland is with the United States.
“If they go heavily on the EU in general, or if they target Ireland in particular specifically, we’re in an awful lot of trouble,” he said.
He said it could mean the State becoming less prosperous, with more outward migration. The transatlantic relationship, which included “policy certainty” along with “trade and investment openness”, might never going back to how it was – at least in the foreseeable future, he said.
Trump’s specific targeting of the Irish pharma sector is “deeply concerning, particularly as it is dominated by American companies”, said O’Brien.
“If the US government were to use all measures at its disposal – carrots and sticks – to lure these companies home, together Ireland’s biggest manufacturing sector by far, would contract significantly. In a worst-case scenario the economy-wide implications for jobs, tax revenues and exports would be highly negative.”
The Government has not been shy itself in setting out the stark impact on the State of a trade war between the EU and US. Minister for Finance Paschal Donohoe has outlined what might happen “if the worst-case scenario was to unfold”: over the medium term – a four-to-five-year period – “it’s very possible that between 50,000 and 80,000 jobs that would have been created or kept within this economy won’t be”, he said.
Taoiseach Micheál Martin told the Dáil a trade war would have a “very serious impact on GDP and GNI – in other words, the income of the State. “It could potentially have a serious impact on employment and it’s the most serious challenge facing this Government,” he said.
A study has been carried out by the Economic and Social Research Institute (ESRI) on the possible impact of tariffs of varying levels. The think tank calculated that if the US were to impose 25 per cent tariffs on all EU exports and the EU responded with reciprocal tariffs of its own, Irish gross domestic product (GDP) would be 3.7 per cent lower over the next five to seven years compared with a scenario with no tariffs.
Based on last year’s GDP figures, that equates to €18.4 billion.
A source involved in the multinational sector said: “There’s a lot of uncertainty out there” among companies that will be closely watching next week’s announcement. Multinationals are said to be positive about investment in Ireland, with the well-educated, English-speaking workforce seen as attractive, particularly to US companies seeking to access the large EU market.
The source said there was no sense of imminent job losses but a trade war could lead to companies changing their future plans for investment.
What can the Government do to counter the risk posed by this?
“The key ask [from companies] is, broadly, infrastructure and housing delivery. Control the controllables. That is what Ireland needs to do,” said the multinational sector source.
“Controlling the controllables” is a phrase Minister for Enterprise Peter Burke has used as he set out how he plans to accelerate the delivery of the Government’s promised Competitiveness Action Plan as part of the response to the threatened tariffs.
Burke pushed back against any suggestion that next week’s announcement in the US could mark the beginning of the end for the Republic’s decades-long economic model of attracting foreign direct investment.
“We have a very agile research, development and innovation landscape here in Ireland”, and a “strong pipeline in seeing our multinationals invest,” he said.
On the threat of tariffs on pharmaceuticals, Burke pointed out that this would make medicines more expensive for US consumers and also lead to a reduction in the amount of revenue the pharma companies put back into the US.
“I think it is a no-win for the US economy,” he told The Irish Times.
The Irish Pharmaceutical Healthcare Association (IPHA), which represents inventors of prescription medicines and vaccines including multinationals, said the companies were hoping any tariffs would not last long.
IPHA chief executive Oliver O’Connor said the industry “has a significant footprint in Ireland, employing 50,000 highly skilled people”, and that it considered their Irish workforce to be “a key asset.”
He said last year there were €99.9 billion worth of pharmaceutical exports from Ireland, more than half of which went to countries other than the US.
The EU will be taking the lead in responding to any tariffs announced by Trump next week. It is expected to take time to analyse the economic impact of any new tariffs before a decision is made on a response.
Tánaiste and Minister for Foreign Affairs and Trade Simon Harris later said: “We here in Ireland and in the European Union think tariffs are a bad thing.” They are bad for consumers on both sides of the Atlantic, for economies and for investment, he said
Mr Harris said it was “highly likely” there will be a “period of economic uncertainty and turbulence” and “it’s essential that that period is kept as short as possible”.
“What I hope happens after April 2nd is that very quickly the US agrees to get around the table with the European Union ... to work our way forward here because all disagreements need to end in agreement.”
It is a sentiment not necessarily shared by Donald Trump.
