In April, US president Donald Trump announced a 20 per cent tariff on European Union goods, but later cut this to 10 per cent to allow time for negotiations.
In May, he expressed frustration with the pace of those negotiations by threatening to raise the tariff rate on EU goods to 50 per cent, applicable from June 1st.
“Our discussions with them are going nowhere!” he posted on Truth Social.
Forty-eight hours later and after a “very nice” call with European Commission president Ursula von der Leyen, Trump pushed the deadline back to July 9th.
A few days after that, a US trade court declared Trump’s across-the-board tariffs, including the initial ones announced on “Liberation Day”, illegal, seeming to blow up Washington’s trade plan.
A few hours after that, a US federal appeals court put a stay on that ruling, reinstating the tariffs until further legal arguments can be made.
Feeling dizzy? You’re not alone. Chief executives, investors, analysts are struggling to get to grips with the tariff-related newsflow and Trump’s ‘keep everyone guessing’ style of diplomacy.
The US bombing of Iran last weekend briefly threatened to open up another front in this seeming permacrisis, potentially engulfing the global economy in another energy price shock particularly if Tehran blocked the Strait of Hormuz. That worry seems to have abated for now.
US trade policy uncertainty is now the biggest headwind facing the global economy and potentially the biggest shake-up in global trade since the General Agreement on Trade and Tariffs (GATT) came into effect in 1947.
The hectic pace of Trump’s announcements is rattling global supply chains and causing unprecedented market volatility even to the normally steady safe haven of US government bonds.
The Economic and Social Research Institute (ESRI) this week cut its growth outlook for the Irish economy, citing turbulence from uncertain US trade policy, which it said would dampen investment and consumption in the coming quarters.
[ ESRI cuts growth forecasts and warns of constraints to building projectsOpens in new window ]
On the basis of a 10 per cent tariff with an exemption for pharmaceuticals, the institute forecast the economy here would grow, in modified domestic demand terms, by 2.3 per cent this year, down from 3 per cent previously, and by 2.8 per cent in 2026.
“With both trade in services and in pharmaceuticals currently outside the scope of the Trump announcements, Ireland is insulated to some degree in the short run,” it said.
“This could change, however, and longer term US policy shifts could threaten the Irish foreign direct investment [FDI] led economic model if both tariff and non-tariff measures act to reshore activity by US firms back to the US,” it said.
The ESRI’s downgrade follows similar ones by the Central Bank and the Department of Finance.
As the think tank openly admits, its forecasts are contingent on the outcome of ongoing EU-US trade talks which are freighted with uncertainty themselves and now coming up against Trump’s July 9th deadline.
EU leaders meeting in the Belgium capital this week are expected to advise the European Commission to reach a quick trade deal with the US on terms that favour Washington rather than fight on for a better deal
At stake is more than €1.6 trillion of transatlantic trade, including Ireland’s €72.6 billion worth of goods exports to the US and, as the ESRI notes, an economic model that is heavily dependent on US investment.
The soundings coming out of the EU-US negotiations aren’t particularly positive with Trump saying Brussels has not yet offered a “fair deal”. German chancellor Friedrich Merz says the negotiations are “too complicated” while Ireland’s EU commissioner Michael McGrath describes them as “protracted”.
The EU’s hoped-for landing point – something less than the 10 per cent blanket tariff that currently applies – appears to have receded amid reports that Brussels negotiators are now accepting the current 10 per cent as a “baseline” and – as German newspaper Handelsblatt reported – necessary to avert any higher duties on cars, drugs and electronics.
The EU’s initial proposal for zero-to-zero tariffs on all industrial goods and purchases of US liquefied natural gas never gained traction.
Tánaiste and Minister for Foreign Affairs and Trade Simon Harris said this week that 10 per cent tariffs on EU goods going into the US would pose a “real challenge” for Irish businesses.
Speaking on Monday, on his way in to a meeting of EU foreign ministers in Brussels, he said it seemed the position of the US administration was that tariffs of 10 per cent were “the new baseline”.
He noted that US trade representative Jamieson Greer had outlined the Trump administration was open to carve-outs for certain industries, where both the EU and US agreed to “zero for zero” tariff rates.
This would make the agreement look like the UK’s deal with Washington (a tariff baseline of 10 per cent with carve-outs). It was thought that Brussels (with the weight of the EU’s economic muscle behind it) would drive a harder bargain than London.
But EU leaders meeting in the Belgium capital this week are expected to advise the European Commission to reach a quick trade deal with the US on terms that favour Washington rather than fight on for a better deal.
“There is a group of EU countries that want to protect companies by seemingly accepting something they have got used to – a 10 per cent baseline,” one EU diplomat told Reuters.
A question then arises as to how the bloc should respond with its own measures to such a baseline tariff. The EU has agreed, but not imposed, tariffs on €21 billion of US goods and is debating a further package of tariffs on up to €95 billion of US imports. Some EU countries favour watering it down.
And many have pointed out, it’s hard to think of a bigger contradiction than Trump’s tax policy, which appears to encourage firms to offshore their activity, and Trump’s tariff policy, which appears to want to force firms to onshore their business.
Sitting at the centre of all this and the big elephant in the room for Ireland are pharmaceuticals, which accounted for nearly 80 per cent of Ireland’s exports to the US last year, worth about €58 billion.
The front-loading of pharma exports into the US to get ahead of tariffs saw Ireland’s gross domestic product jump by almost 10 per cent in the first quarter of 2025.
Harris has warned that Irish pharma exports to the US could decline by about half if the Trump administration applied a 20 per cent tariff on the sector and Brussels responded in kind.
So far, the sector remains outside the tariff dragnet. Is that because Washington wants to hit the sector with a specific tariff rate or because it is planning get at the offshoring by these firms through specific tax changes?
The White House says it is waiting on a report on the sector and there is nothing much in Trump’s “Big, Beautiful” tax Bill that signals the potential policy direction.
The so-called Gilti (global intangible low-taxed income) tax rate – brought in by Trump during his first term to target income from intellectual property such as copyrights, licences, patents and trademarks – was partly aimed at tackling the displacement of pharma activity.
It backfired, triggering a further offshoring of US assets and another surge in tax receipts for the Irish exchequer.
The Government and IDA Ireland have always been more fearful of a change in the US tax code rather than tariffs, which could, in theory, stem the flow of investment here.
In what the Central Bank sees as an “extreme scenario”, involving the State losing the entire windfall element of its corporate tax base combined with a 20 per cent reduction in multinational investment, it predicts Ireland could be left with a near €18 billion budget deficit by 2030, a scenario that would presumably throttle Government attempts to overcome deficits in infrastructure and housing.
But the real fear is whether US protectionism under Trump finally upends Ireland’s winning streak as the go-to destination for US multinationals wanting to trade in Europe.
