As the whole world braces itself for Donald Trump’s second term as US president, one of the biggest talking points of the celebrity real estate magnate-turned-politician’s historic election victory is the potential impact on global trade.
Trump is an avowed protectionist who sparked a trade war with China and other countries during his first term in the White House by imposing tariffs on many imported goods. He has indicated he is planning to go much further when he is inaugurated on January 20th, with astonishing threats to impose punitive tariffs of up to 100% aimed at a wide of targets
The EU is in the firing line, and also faces the uncomfortable prospect of being piggy-in-the-middle should China and the US embark on a heavyweight trade slugfest. So what does all of this potentially mean for Irish businesses and the wider Irish economy?
Ireland’s double bind
Ireland finds itself in something of a double bind regarding Trump’s trade policies. It’s not just tariffs and how they could suppress demand from our second-biggest export market. There’s also the issue of the huge sums of US-based capital that have flown into the country for more than a decade.
Ireland’s much-talked-about budget surplus is based almost entirely on the presence of US multinationals attracted by the country’s low corporation tax rates. The likes of Apple, Google, Microsoft, Meta, Pfizer and Intel are among a group of 10 conglomerates that are thought to contribute some 60% of Ireland’s corporation tax receipts.
On top of the billions of dollars worth of corporation tax flowing into Irish rather than US treasury coffers, Ireland also runs a $35bn goods trade surplus with the US, a figure that has grown by 8% in 2024 alone.
None of this sits well with Trump’s America-first economic mantra. His nomination to lead the Department of Commerce, Howard Lutnick, has already singled out the trade relationship with Ireland for criticism. As well as EU-wide tariffs, it’s expected that the Trump administration could lower domestic corporation taxes to lure back those that have offshored operations. Taoiseach Simon Harris said during the recent election campaign that losing just three of the big 10 to such a repatriation process could cost Ireland $10bn in tax receipts.
A bitter pill for pharma
The double-whammy effect of tariffs and reduced direct foreign investment will be felt most keenly by some of Ireland’s most strategically important industries. Ireland’s pharmaceutical industry accounts for 55% of the country’s total export value, with the US representing its single biggest market. It also attracts significant investment from the US, with the likes of Pfizer and Johnson & Johnson basing their European operations here.
Any dampening down of demand for Irish pharmaceutical goods from the US due to tariffs could put jobs at risk and would have a knock-on effect on the industry’s wider supply chain. Any loss of tax advantage that sees major companies reshore production back to the US would be even more damaging. Given the strategic importance of pharmaceutical exports to the US, the ripple effects across the whole Irish economy could be considerable.
More generally, many economists argue that Trump’s tariffs would add yet another inflationary pressure to an already hot global economy. In a tit-for-tat trade war, prices inevitably go up on all sides. Given the way rising costs have hindered domestic businesses over the past five years, this is the potential fall-out from Trump’s economic policies that no Irish business wants, regardless of direct exposure to US markets.
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