Implications for Ireland of EU/US trade deal still unclear
European Commission and White House statements yesterday provided a little more clarity on the EU/US trade deal, but still leave many aspects uncertain. Key for Ireland is that pharmaceutical tariffs of 15% do not look set to apply immediately from August 1st, but rather will follow the conclusion of the US administrations’ Section 232 investigation into the sector. US Commerce Secretary Howard Lutnick has said he will report his conclusions on pharmaceuticals in August. Another source of uncertainty is the scope of sectoral carve outs, potentially including important sectors for Ireland such as medical devices, semi-conductor equipment and spirits. A clearer picture of the deal may emerge once a joint EU/US communique is published, expected by Friday, August 1st.
While many Irish firms may face a difficult adjustment to the new 15% tariffs, the negative first-round impact onto aggregate Irish GDP will be limited. Non-pharmaceutical goods exports to the United States accounted for just 2-3% of total Irish goods and services exports of €809bn in 2024. The defensive nature of pharmaceutical exports, with a low price-elasticity-of-demand, means the cost of any tariffs will likely be borne by US consumers with production in Ireland maintained. Pharmaceutical firms may also choose to absorb US tariffs into their profit margins, rather than reduce output.