The latest decision by Donald Trump to double the level of tariffs on steel and aluminium imports from 25 per cent to 50 per cent may have a limited direct impact on Ireland. But the move is of wider importance than just its narrow impact on the sectors involved. And this needs to be understood in Dublin.
The first point to note is the obvious one. Despite the ruling of the federal trade court last week that Trump had gone beyond his authority in imposing tariffs without getting the go-ahead from Congress, the US president is determined to push ahead. In choosing the steel and aluminium tariffs, he is focusing on an area which was not part of the federal court ruling - tariffs imposed in a specific sector for national security reasons.
For Ireland , the concern here is that pharma and computer chips also fall into this category. In pharma, in particular, the president may soon be in receipt of a report he commissioned which could give him leeway to impose sectoral tariffs. Ireland needs to remain alert to this risk.
The second point to note is that Trump’s tariff policy continue to be driven in large part by headlines rather than substance. The steel and aluminium tariffs allowed him to trumpet his protection of a key US sector. But in reality there is little space capacity in the sector to take up the slack from a lower level of imports. And prices will rise for the many businesses importing these products.
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The same calculus may apply in the pharma sector – and here it would take American companies a long time to return production to the US market. Tariffs would mean supply disruption and higher prices. But that does not mean they will not happen.
The final, and perhaps most concerning, point is what Trump’s latest move means for the negotiations between the EU and the US. Brussels has held off from responding to the tariffs imposed by Trump so far – including the first round of steel and aluminium tariffs, hoping to clear the way for a negotiated deal. It would be in Ireland’s interests were such an agreement to emerge, avoiding a full-scale transatlantic trade war.
Now, however, with the steel and aluminium tariffs hiked to 50 per cent, pressure will grow on Brussels to respond. The EU wants to do a deal , for sure, and there is an argument for it to drag things out a bit longer to see how this latest move plays out. But the EU cannot be seen to be pushed around by Washington. In turn, if it retaliates, this could sour the mood of the talks and lead to further retaliation from Trump.
This is how trade wars start. The concern is that the US side still expects unilateral concessions from the EU, while Brussels is preparing for a give-and-take negotiation. Despite Trump’s legal power on blanket tariffs being trimmed, significant risks still lie ahead.
