Ireland's small, open economy is about to be put to the test
Forty per cent of Irish whiskey exports go to the US and they could become a target in Trump's next round of tariffs. Picture: Aidan Crawley/Bloomberg
US president Donald Trump has moved ahead with tariffs on Canada, Mexico, and China, so it is now clear a wider trade war has commenced and the EU and Ireland are next.
As the tariff threats have become a reality, there is a scramble by countries to find out how their exports will be impacted. When it comes to trade with the US, Irish exports are dominated by pharmaceuticals. In the first 11 months of 2024, we exported €67bn in products to the US. According to the CSO, €41.1bn of those exports were medicinal and pharmaceutical products.
It is hardly surprising when we consider pharmaceutical companies have formed the bedrock of foreign direct investment in Ireland for over half a century, particularly from the US.
Pfizer, Eli Lilly, Johnson & Johnson, Stryker, Bausch + Lomb, Regeneron and Abbvie are just a few of the multinational companies with a major presence here and the products they export worldwide are eyewatering, with Ozempic, Paxlovid, Botox, cancer drugs, contact lenses, stents and artificial hips on the list.
How these exports will be targeted by tariffs remains to be seen, with the US president prone to making numerous threats, only some of which are fulfilled.
In his previous term, it was Irish food that was impacted by tariffs and if the Trump administration is not eager to impact the import of vital pharmaceuticals, they could instead target food.
Ireland's food and drink products are world-renowned and include Kerrygold butter and Jameson whiskey. Last year, we exported a record €17bn in food and drink abroad, up 5% on 2023.
If the US proceeds with tariffs on Ireland and the EU, Irish food exporters, at least, have the benefit of experience. During his first term, he unveiled a 25% tariff on a range of products, including butter and cream liquors, with whiskey receiving an exception. That row was related to US anger over European subsidies for Airbus.
When publishing its export report last month, the same week President Trump was inaugurated, Ireland's food promotion agency Bord Bia made it clear tariffs were a looming threat.
While US tariffs placed on flagship Irish food items like dairy and whiskey would be a tangible visualisation of the trade war, it remains the case that Ireland's food exports to the US are relatively small compared to other commodities, particularly pharmaceuticals.
Our closest neighbours the UK, and then EU, are by far Ireland's biggest export market, both of them buying just under €6bn in Irish food and drink last year.
The US imported €750m of Irish dairy products last year and just €10m of beef. Canada, currently front and centre in Trump's trade war, buys far more Irish beef, importing €20m in 2024.
It is Ireland's booming whiskey industry that has much to lose. We exported €1bn in whiskey last year, 40% of it ending up on the shelves of US consumers. Exports of cream liquors, like Baileys, have also increased in recent years to €380m.
Overall, a global trade war will see Ireland join a wealth of other countries trying to assess the impact and minimise damage and it remains to be seen which countries and what sectors will be most impacted.
What is a much larger threat, however, would be a possible move by the Trump administration to fundamentally alter its tax policy targeting the tech sector. US multinationals booking their profits in Ireland and hosting their intellectual property means our tax receipts have become bloated, with the State recording significant monthly surpluses.
Every piece of analysis has warned Ireland any changes to this income would swing the State's coffers into a deficit by a significant margin. The physical presence of many US multinationals here through office space or major pharmaceutical production plants does offer medium-term resilience for the Irish economy. This was evidenced as recently as Friday when US healthcare giant GE announced a €132m plan to expand its facilities in Cork.
However, the well-worn phrase about Ireland being a small, open economy is about to be put to the test.
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