Ireland faces tough choices as US trade tensions escalate

Amid ongoing tensions between the United States and the European Union, Ireland finds itself in a precarious position as trade talks intensify. For years, the Irish economy has benefited significantly from US investment, but concerns are mounting over potential tariffs and tax changes that could undermine its economic stability.

Currently, Ireland holds the fourth-largest trade surplus in goods with the US, exporting €72.6 billion in 2024 alone. Pharmaceuticals dominate this trade, with nine of the ten largest global pharmaceutical companies – including Pfizer and Johnson & Johnson – operating in Ireland. Last year, pharmaceutical exports to the US amounted to a staggering $50 billion. Despite this, Ireland also runs a €134 billion services trade deficit with the US, a fact officials are eager to highlight to temper fears in Washington.

However, US President Donald Trump has expressed strong opinions on trade imbalances and has warned of potential sanctions targeted at countries exporting heavily to the US. Any blanket tariffs on European Union exports would hit Ireland harder than its EU counterparts, given its disproportionate reliance on the US for trade. Economists also warn that tax revenue from US corporations, which accounted for 28% of Ireland’s 2024 budget, might decline sharply if American companies are forced to relocate back to the US.

At present, approximately one in ten private-sector workers in Ireland is employed by an American company. Over the last decade, these firms have deepened their ties with Ireland, bolstered by the country’s low corporate tax regime and favourable environment for intellectual property transfers. This has seen a dramatic increase in corporation tax revenues for Ireland, rising from €4.6 billion in 2014 to €28 billion in 2024. Any disruption to this pipeline could have severe implications for public finances.

Irish officials are taking proactive measures in response. Businesses such as Boann Distillery, which relies on the US for 30% of its revenue, are stockpiling goods destined for American markets to avoid potential tariff hikes. Nevertheless, these actions are only short-term solutions, and fears of a broader economic impact linger.

While Ireland has worked to showcase the two-way nature of its relationship with the US, highlighting American businesses’ extensive foothold in the country, recent policies and rhetoric from the White House continue to stoke uncertainty. Fiscal experts stress that Ireland is more vulnerable than most small economies due to its dependence on foreign direct investment and corporate tax inflows.

Although any shift of American manufacturing from Ireland to the US would take years, analysts are particularly concerned about the possible relocation of intellectual property assets. Such a move could strip Ireland of a significant competitive advantage in the global economy.

For now, Ireland must navigate these challenges with caution, as the outcome of these trade tensions holds significant ramifications for its economic future. With both tariffs and policies on the cards, the strong ties between Ireland and the US are being tested like never before.