Q&A: What does the latest Trump tariff move mean for Ireland?

Irish Times

2 days ago

What has Trump announced on tariffs?
US President
Donald Trump
has announced
that he will extend the deadline for a trade deal with most other countries – including the
European Union
– from Wednesday July 9th to August 1st. Even this, as Trump himself said, is 'firm, but not 100 per cent firm.' (EU)
The EU goal will be to do some kind of outline agreement with the US in the weeks ahead, to avoid Trump imposing significantly higher
tariffs.
Remember that he had threatened to impose 50 per cent tariffs on many EU imports if no deal is done. Even if tariffs at this scale would have been unlikely to persist – given their massive damage on the US economy as well as Europe – the EU fears damaging action if no deal is done.
We saw late on Monday that Trump is now threatening 25 per cent tariffs on Japan and South Korea, and has also written to a further dozen countries with tariff threats. For now, at least, no letter has been sent to Brussels.
READ MORE
What happens next?
Talks between Washington and Brussels will continue, in a bid to map a way forward which avoids additional tariffs and chips away at those already in place.
[
EU gets three-week extension to negotiate US trade deal to avert escalating tariffs row
Opens in new window
]
But the mood in Brussels seems to be a bit downbeat and uncertain, despite the postponement of the Wednesday deadline and the fact that the EU did not receive a letter. It appears that the US will only accept a deal that keeps the wide 10 per cent additional tariffs imposed on imports in most sectors in place.
Progress seems slow on getting an agreement to reduce the 50 per cent tariffs on steel and aluminium and the 25 per cent on cars, which is a big issue for the German motor sector. And the US is also pushing for changes in rules and regulations to make it easier for US companies to sell into and operate in the EU.
Will this all be sorted by August 1st? That looks most unlikely. At best there might be some kind of outline agreement – but that would require further talks. And it is still possible that the talks reach a crunch point and break down, leading to the US increasing tariffs on EU imports and the EU responding with tariffs of its own. In other words a trade war.
How the wealthy are buying up land to avoid inheritance tax
Listen |
22:03
There are varying views in the EU on how to proceed. Germany wants a quick deal to protest its car exporters, but France is arguing for a more bullish approach, where the EU uses its own economic muscle. So far, the EU has held off retaliatory action for the tariffs Trump has imposed so far, though if there is no wider agreement this cannot continue for ever.
What about Ireland?
The additional 10 per cent tariffs in place are hitting some Irish exports, notably in the food and drink sector – in areas like butter and whiskey, as well as medical products.
Ireland would prefer they were negotiated away – hence Tánaiste Simon Harris talking about a " zero for zero' deal – but this looks unlikely. There are reports that spirits and aircraft could be excluded from tariffs, which would be positive for Ireland.
[
There is a strong logic for US firms to continue making drugs in Ireland for non-US markets
Opens in new window
]
For now, the wider pharma sector – a vital Irish national interest – has not been hit, but there is no clarity on what might happen here.
The Trump administration has undertaken a study of trade in this sector and this could pave the way for special tariffs, perhaps at the 25 per cent level applied to cars. It remains unclear what will happen here, or what other pressure Trump will put on the pharma companies to produce more in the US for the American market.
Ireland would be keen to get pharma closed off as part of any initial deal, removing the threat of a negative report to the US administration spurring further action. But this could be hard to achieve.
So far, the Irish economy has escaped any major hit, thought the uncertainty is affecting investment with many major projects on hold.
[
US threatens EU with 17% tariff on food exports
Opens in new window
]
The 10 per cent tariffs and the fall in the value of the US dollar have also hit exporters to the US. More uncertainty still lies ahead in the short term as trade talks rumble on, most likely amid more threats from Trump and the risk of some kind of trade war which could seriously affect growth. And in the longer term there are questions about whether Ireland will lose some US investment and tax revenues.
There is a more benign scenario, too, where the US and EU avoid all out trade conflict and some kind of agreement emerges without further major tariff hikes.
Why has Trump got so bullish on tariffs once more?
A serious wobble in the financial markets forced him to draw back in April from his initial tariff threats. The recovery in the markets since then, steady US economic indicators and political 'wins' at home and abroad, including the new budget bill, seem to have emboldened him again.
Markets now seem to reckon that the worse will not happen
in terms of a trade war – but serious further tensions could lead to more upheaval and stay Trump's hand.
He is also facing legal challenges in relation to his powers to impose widespread tariffs and we will have to see where these end up, too. As has been the case for months now, much remains up in the air.