Tariffs to have 'small impact' on Irish economy, says Ifac

The sectors in Ireland most exposed to tariffs are pharmaceuticals, medical devices and semiconductors.

Ireland’s fiscal watchdog has said the impact of tariffs on employment will likely be quite small despite the economy’s strong reliance on the US as a key trading partner.

Publishing its pre-budget statement today, the Irish Fiscal Advisory Council (Ifac) said many large manufacturing plants in Ireland are already well established, with little risk that they will be relocated to the US.

The sectors in Ireland most exposed to tariffs are pharmaceuticals, medical devices, semiconductors, and the drinks industry, with these sectors currently employing 140,000 people.

However, Ifac stated: “Moving pharmaceutical production is very difficult to do quickly. It typically takes five to 10 years to build a new plant, make it fully operational, and secure FDA approval.

“In addition, specialised skills are required to operate a pharmaceutical plant successfully.

“The medical devices sector is also an important employer in Ireland. Relocation of production in this sector is also not straightforward.

“Getting FDA approval for a new facility producing higher risk medical devices is not straightforward and can take considerable time.”

Ifac said that, given production in Ireland is predominantly in higher risk products, it would be harder to shift production of these elsewhere quickly.

Noting the semiconductor industry, Ifac said it appears to be less exposed to US tariffs, due to only 13% of exports from Ireland going to the US.

However, the watchdog warned that the drinks industry is likely to be impacted by tariffs, with 22% of drinks exports going to the US, mainly soft drink concentrate and whiskey.

It noted, however, that the drinks industry is a much smaller employer than the other sectors it discussed.

Overall, the fiscal watchdog said the short-run impact of tariffs on employment in Ireland will be quite small but that the long-term impact would be harder to quantify. However it added that the impact would most likely be felt in jobs not being created rather than existing jobs being lost.

“This is not to say that certain sectors won’t be impacted. But in the context of an economy with 2.8m people at work, this impact is relatively limited,” Ifac said.

The watchdog added that any impact on employment in these sectors would have an impact on the public finances, with employees in these multinational-dominated sectors often well paid, and hence paying significant amounts of income tax.

“Multinationals operating in Ireland have already shown how agile they can be in responding to a changing landscape,” Ifac said.

“Pharmaceutical exports have already comfortably surpassed the total from 2024. Some of this is due to firms pre-emptively moving goods to the USA. But it may also reflect increased production capacity in Ireland.”

The watchdog called out the Government’s €9.4bn budget package of tax cuts and spending increases, warning that it risks overheating the economy and is being planned without any clear roadmap.

Ifac highlighted that the Government has yet to publish an updated medium-term fiscal structural plan, saying it was “disappointing” that the plan was not published along with the summer economic statement as promised.

Ifac chairman Seamus Coffey warned they were “flying bind” without a clear budgetary plan in place.

Relocating pharma plants would cost too much time and money