Former German chancellor Angela Merkel was said to have a knack for dressing up some decisions that suited Germany as being in the European Union’s interest. The long-time German leader was good at getting her way without being seen as narrowly looking out for her own home patch, according to one person inside the room at summits of EU leaders during Merkel’s time.
This is something the Irish Government will have to get better at as it navigates the tariff row kicked off by US president Donald Trump. Ireland is the most exposed of the EU’s 27 states to a full blown trade war with the US given the outsized role US pharmaceutical and tech multinationals play in its economic success.
Government Buildings scored an early win in its lobbying efforts to tone down the EU’s first swipe back at the US. The European Commission, the EU executive arm responsible for the bloc’s trade policy, was convinced to drop bourbon and dairy from a list of US products it planned to hit with retaliatory tariffs.
Ireland feared that putting import levies on bourbon and dairy coming from the US would draw even higher tariffs from Trump on Irish whiskey and butter, two of its big exports stateside. France and Italy also feared their exports of wine and cheese would be singled out by Trump. Political pressure from Paris and Rome had a big role in the commission’s u-turn.
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The EU’s package of counter-tariffs has been put on ice until mid-July in response to Trump’s 90-day “pause” on the higher rate of tariffs he imposed on trading partners. A 10 per cent tariff still applies to most goods sold into the US from the EU, and a 25 per cent tariff remains on steel, aluminium and cars.
Trump has spoken about wanting to cut a deal, something the EU is keen on, but preliminary talks have gone nowhere. More US tariffs are likely on the way, specifically targeting pharmaceuticals.
Pharma exports account for a large chunk of Ireland’s trade heading to the US, so the Government is under pressure to stand up for the industry’s interests at EU level. Here it has friends in the governments of Belgium, Denmark, Sweden, the Netherlands and Germany, who all have big pharma sectors.
Similar to the game plan to protect spirits and dairy, Dublin has been allying itself with other like-minded capitals on pharma. This loose coalition will oppose any EU response that heavily disrupts the industry’s complex transatlantic supply chain.
Things get much more difficult for Irish diplomats and politicians when it comes to tech services.
Ireland only has so much political capital to spend in Brussels. Insist on too many red lines and you will be accused of trying to box the EU in. “The tricky spot for them will be digital. They can’t come with the begging bowl all the time,” one commission source said of Ireland’s lobbying.
The commission has insisted everything remains on the table in the escalating trade fight. European Commission president Ursula von der Leyen has suggested this might include putting a levy on the advertising revenues of US tech multinationals, something Taoiseach Micheál Martin said Ireland would “resist”.
To do this the EU would turn to the anti-coercion instrument, known as the “big bazooka” of its trade arsenal. The instrument would give the commission wide-ranging powers to push back against economic coercion, and has never been used before. Using it against the US would be a big call.
Ireland will have to “box clever” in how it voices opposition to any efforts to go after big tech, another commission source said. “There wouldn’t be a whole lot of sympathy for Ireland on it.”
The Government will argue that penalising US tech companies would be a serious escalation when the focus should be on bringing the temperature down and trying to negotiate.
The recent comments from von der Leyen do not mean the commission is about to launch a dramatic broadside on the operation of US tech multinationals in Europe. The anti-coercion instrument was intended as a response of last resort. So von der Leyen was never going to take the powerful deterrent off the table before serious EU-US negotiations had even begun.
The commission is leading the EU’s response on tariffs but would need a majority of national capitals to back it using the so-called bazooka.
France has been pushing for the EU to hit US tech services, while Germany has been more cautious. Hard-right Italian prime minister Giorgia Meloni is opposed to any major escalation.
Nearly every leader has repeated the need for unity in how the EU responds to Trump’s tariffs. Martin and Tánaiste Simon Harris will have to be creative if they are to spin protecting US tech multinationals as something that’s in the best interest of not just Ireland but the EU.
