Ireland’s exports to the US fell by 65 per cent in the first half of this year, dropping to €26.2 billion from €75.1 billion in the same period of 2025. It is the latest part of a rollercoaster ride.
This scale of fall-off would normally be enough to start a panic. But in Ireland, many national economic statistics are so distorted we need to look for the reality behind the data.
When we measure exports, we normally refer to their value. The recent Central Bank quarterly report pointed out that the fall in exports in the first half of 2026 related largely to the pharma sector and particular exports of polypeptide – or weight-loss – drugs. The export value of these drugs – the price declared to US customs – fell to €0.5 billion in the first half of this year, versus €42 billion in the same period last year.
But here’s the thing. Actual export volumes – the physical amount of this product being exported – did not change by much. This means the price at which the drugs are being exported and declared to US customs has fallen sharply.
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Weight-loss drugs, a sector in which Eli Lilly is Ireland’s largest producer, have not suddenly collapsed in value. Demand for them is growing, after all. So what exactly is going on?
We enter the realm of speculation to try to work out this conundrum, albeit, as Sherlock Holmes once famously said: “When you have eliminated the impossible, whatever remains, however improbable, must be the truth.”
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We know for sure that the amount of drugs being sent to the US has not changed that much. There was a big increase in some months when speculation of Trump tariffs was at its height – such as around the April 2025 “Liberation Day” announcement. But average monthly run-rate quantities have, outside this, remained constant enough, according to the Central Bank.
Another possibility is the big firms involved have fundamentally altered their tax structures, leading them to declare large profits in Ireland and thus pay a lot of tax here while selling drugs back to the US at a high cost. This is what has annoyed US president Donald Trump. But if this had happened we would almost certainly have heard about it – and there would be fears about the impact on taxes.
Instead, the most likely explanation is some of the big companies are engaged in the what might be called customs planning. They were trying to insure their operations against the risk of a sudden imposition of big tariffs on pharma imports by the Trump administration, which has been threatened on a number of occasions.
Tariffs have not been imposed. Despite the threats, most Irish pharma exports to the US remain tariff-free. But some big firms have been preparing, in case this did happen. And this has been central to the conundrum presented by the export figures
The Central Bank appeared to allude to this in its recent commentary, when it referred to a fall in “customs goods exports”.
Previously, in Ibec’s third-quarter economic commentary for 2025, its chief economist, Gerard Brady, writing about the swings in export figures, said one issue that would have to be watched was “the strategies employed by major companies to minimise their customs costs”. This could lead, he said, to lower-value measurements of Irish exports, though with limited impact on trade volumes – and that is exactly what we are seeing.
These could include changes in pricing between different parts of the same firm, he said, and the use of the “first-sale” rule in dealing with US customs.
This is where the most likely explanation lies for the extraordinary divergence in the trade figures and the fall in the value of polypeptide exports when volumes remain roughly constant.
The US first-sale rule allows imports to the US to be valued at the price paid in the first transaction in a potential string between the manufacturer and the wholesaler – and not necessarily at the price paid by the US importer. Once this is undertaken within the rules, it is all perfectly legal.
On this basis, companies have set up structures that allow them to sell goods – such as drugs – from one of their internal companies to another, typically from an Irish manufacturing subsidiary to an Irish export subsidiary, thus establishing a different, lower value for customs purposes. The Irish export subsidiary then sells the goods on to the US.
The “first sale” is from one Irish firm to another and the theory is this reflects the cost of the product when things such as brand value – resulting from the massive research investment into drugs – are stripped out. These form part of the final price charged to the US importer. But the tax rule allows them to be excluded from the value for customs purposes.
This requires meeting various rules – such as that all the transactions in the chain are on an “arms-length” basis, that transfer pricing rules are adhered to and that the various sales reflect the value added at different stages.
Irish accounting firms and those elsewhere have advertised their services to companies to ensure this is done within the law.
As it turned out, Trump has not gone ahead with pharma tariffs, though of course he still could. So, to quote Holmes again, this was a case of the dog that did not bark.
The danger the companies have guarded against by setting up structures to take advantage of this rule has not come to pass – not yet anyway. But you can see that if tariffs were imposed, having a much lower value on the US customs price – on which the tariff would be levied – could potentially save an awful lot of money.
The first-sale rule has grown in popularity in a number of sectors and countries in the past couple of years to try to avoid the worst impact of Trump’s tariffs and has been widely marketed by US advisory firms.
A Bill has been introduced in the US Senate to try to close it off, with Republican senator Bill Cassidy arguing it undermines the goal of Trump’s tariffs. He wants to replace the rule with a “Last Sale Valuation Act”, ensuring importers pay duties “based on the true commercial value of imported goods, rather than artificially low declared values”. This legislative move reflects the fact that companies in sectors where tariffs have been imposed have used the strategy to cut their bills.
For Ireland, the use of this customs planning strategy at least appears to mean tax revenue here is not likely to be affected by the drop in measured export values. A kind of new “Double Irish” in which the product is first sold to another Irish subsidiary is central to the strategy and profits declared in Ireland would not necessarily be affected.
The more cautionary part of the tale is it shows how quickly pricing policies can be tweaked. It also underlines the chain of tax planning used by big multinationals and the huge inflation in Irish profits resulting from the companies declaring profits here based on the high sales price of the drugs into the US system, rather than the lower level of value added in Ireland. And, of course, it messes up the Irish export figures and undermines comparisons with GDP data, themselves now completely distorted.
