Taraif
“Taraif”
The prospect of US tariffs against Europe and Ireland in particular
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President Donald Trump recently proclaimed that “the most beautiful word in the dictionary is ‘tariff’” and that it is even more special than the word “love”. Well the word is all the rage right now and it is generating as many questions as answers. I am admittedly no economist but I do have some thoughts on the ultimate impact the proposed tariffs (taraif in Irish) may have upon Europe and more specifically Ireland.
The use of tariffs is nothing new in international trade, the consequences of their use however is not consistent. Despite what President Trump contends publicly, the accepted truth is that the proposed tariffs, whether 25% (Canada and Mexico) or 20% (“additional” 10%) on China in this case, are paid by the importer of the goods. The U.S. importer pays an additional 25% of the price of the imported goods and that additional cost is absorbed down the supply chain ultimately to the consumer. Thus, for all intents and purposes it amounts to a self imposed tax.
As the President finally admitted in his State of the Union address, the imposition of tariffs will be disruptive, involving an adjustment period.
The use of tariffs is to arguably change behavior. In this case to compel American manufacturers to bring their corporate headquarters back to the United States and, in so doing, to produce the products/goods in question in facilities located and built here in the good old U S of A. The by-product of course is more jobs filled by American workers and more corporate tax revenue for the federal coffers.
Ireland and its many attractive business incentives and offerings have successfully lured many American companies to its shores. Companies like Apple, Intel, Pfizer, Eli Lilly, Johnson and Johnson, Google and Meta to name a few! The many offerings include the following: a competitive corporate tax rate (12.5%), access to the entire European market via the European Union (EU), the proximity to the United States, English speaking, and a young and talented workforce educated by world class universities. (See more in a post here) Ireland’s chief exports are pharmaceuticals and med devices as well as dairy and beef, although on a much smaller scale. Thus, in some cases, American companies are selling their products to the United States market albeit with a corporate headquarters in Ireland and paying a 12.5% tax to the Irish government.
According to the Irish Fiscal Advisory Council, U.S. multinationals account for three quarters (75%) of the total corporate tax revenue in Ireland. Irish exports to the U.S. last year increased by 34% to a total of $72 billion U.S. dollars. The entire Irish surplus for 2024 is around the €22 billion Euro mark. Enter Howard Ludnick, the former Cantor Fitzgerald chief and current Secretary of Commerce. Ludnick has Ireland in his cross hairs and has mentioned the country in public remarks several times. He told Bloomberg, “Why is Ireland announcing a surplus? Give me a break. It’s all our (United States) business. Have them (U.S. multinationals) pay their taxes in America, that is how you fix America.” The administration has not publicly declared a specific plan for tariffs on Europe as of yet but all of Europe and Ireland in particular are on the edges of their respective seats given the rhetoric cited above and that of then candidate Trump in the lead up to the November ‘24 election. More recently, during a cabinet meeting the President said that a decision has been made about implementing tariffs against Europe, one of the reasons for which is that “it (Europe) was formed to screw the United States”. Regardless, it appears that a major priority of the Administration is to bring these companies back to America. Realizing this priority, however, will be no slam dunk.
First of all, tariffs alone may not achieve Trump's goals and more may have to be put on the table. A lower corporate tax rate is, without question, one of those items. Apparently a rate of 15% is currently being discussed in Congress. Despite the President’s reliance on executive orders, any tax matter absolutely requires congressional approval. Secondly, the Canadian and Mexican tariff scheme could blow up in the administration’s face resulting in tariffs against Europe never coming to fruition. There is already uproar about the challenges that car manufacturers are facing with balancing the acquisition of parts manufactured in Mexico for an American vehicle being assembled in Canada. Things may very well become very convoluted and frustrating in terms of implementation. An hour after writing a first draft of this post the White House announced a one month delay in implementation of tariffs on car parts from Mexico. Frustration is also a familiar word these days for republican law makers that have sponsored so-called town hall meetings in their home districts. Many are facing angry voter backlash - specifically in regard to the leader/non-leader of DOGE, Elon Musk, and his chainsaw job on the federal workforce. Which brings us to point number three - these Republican congressmen and women have to run again in less than two years time. Are they willing to sacrifice their seats for loyalty to a lame duck president who will leave them in the lurch to achieve his grand agenda for the new America? Political realities may result in incumbents having to come out publicly against any further tariffs that will ultimately raise prices for their constituents.
Back to Ireland and the EU. Things are not as gloomy as they may seem. For one, as intimated earlier, time is on their side. Once Americans start to feel what President Trump refers to as “a little disturbance” during the initial phases of the tariff implementation, their patience will quickly fade. As the price of eggs and now beef continues to rise, as well as the prospect of a $10,000 increase in the sticker price of a car, that impatience will morph into resentment and anger. Does the administration want to increase the cost of prescription drugs that Americans rely upon on top of all this? Stay tuned!
Furthermore, technically pharmaceuticals should be exempt from any tariff pursuant to the WTO’s 1994 Agreement on Trade in Pharmaceutical Products (the Pharma Agreement). The question, however, is will the administration abide by that agreement and exempt pharma or simply argue that the 90s agreement is obsolete and not relevant to this initiative. In addition, some of the companies in question have other significant investments in Ireland. Intel, for example, just built a €17 billion Euro plant in Kildare. The attraction of Ireland as a destination for these companies goes beyond the 12.5 % corp tax rate, a fact that may very well be overlooked by the current administration. Corporate resistance will in my opinion be forthcoming.
Regardless of the outcome, the Irish government has been on notice of what may be coming and has made preparations to the extent they can, not the least of which is to carefully consider the disposition of the significant 2024 surplus. Newly minted Tánaiste Simon Harris who also serves as the Mister for Foreign Affairs and Trade has convened a committee of key Irish stakeholders to discuss trade with the United States at a time when “protectionism, national security concerns and geo strategic considerations” shape international trade.
As fate would have it, all of this tariff chaos arrives on the dawn of St. Patrick’s Day 2025. President Trump will continue the shamrock ceremony (see my post here from 2017) and has extended a formal invitation to Prime Minister (Taoiseach) Micheál Martin for next week - March 12th at the White House. When asked, the Taoiseach said on RTE’s the Late Late Show “I have never met Doanld Trump, but I am looking forward to meeting him.” The annual event is a great opportunity for the Irish head of state to meet privately with the US president and discuss all things of importance to the current Irish government and US-Irish relations in general. Traditionally it is a friendly occasion that includes breakfast or dinner at the White House and a lunch sponsored by the Friends of Ireland Caucus at the U.S. Capitol, a tradition started by one of our own - then Speaker of the House Tom “Tip” O’Neill. This year may be rather significant given the tariff threat and the ongoing situation in Gaza. I have no doubt that the Taoiseach’s advisors are preparing him for a grade A performance in the Oval Office. An emphasis on gratitude may be a key tactic for him to pursue, lest he be shown the door!
Sources:
https://www.irishexaminer.com/business/companies/arid-41580283.html
https://www.euronews.com/business/2025/03/05/heres-why-trumps-tariffs-could-hit-ireland
https://www.bbc.com/news/articles/cre8expj2leo
https://www.washingtonpost.com/world/2025/01/17/trump-corporate-tax-ireland/