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Japan will take it in its stride, even if its automakers might be hit. China will absorb the extra costs, and the UK has already managed to secure its own trade deal. President Trump’s tariffs have largely been shrugged off by the US’s major trading partners. We may, however, soon see one exception. His imposition of huge levies on pharmaceutical manufacturing may kill the Irish economy.
Amid the latest round of tariffs, there is one of genuine significance. President Trump is planning to impose a 200 percent tariff on imports of drugs, and possibly semi-conductors as well. In a rare moment of seriousness, the plan is to impose them from next year, instead of next month, so that manufacturers have a chance to reorder their supply chains. They won’t have much choice. With 200 percent tariffs, the big drug companies will have to build factories in America for what is by far their most profitable market. If they don’t, their profits will be wiped out.
Ireland has been running what amounts to a clever tax wheeze
Trump’s target here is clearly Ireland. The country has carved out a lucrative niche in pharma. The drug giants make medicines there, ship them to the US and book the profits in Ireland, where they only pay 12.5 percent in corporate taxes, and often much less once the accountants get to work on the numbers. The sector employs 70,000 people, accounts for 15 percent of GDP and is critical to Ireland’s surging corporation tax revenues. It has been a huge part of the country’s prosperity.
The problem for Ireland is that President Trump has a point. Most of his tariffs are senseless, and will do little for either the American or global economy. But Ireland has been running what amounts to a clever tax wheeze, allowing American multinationals to lower their bills and making itself very rich in the process. It was good while it lasted, but outside of Dublin and Cork most people will agree that it was unfair, and Trump is quite right to bring it to a close.
It will be hard for Ireland to argue against these tariffs, and, even worse, it will be difficult to get the European Union to make its case, since Brussels doesn’t approve of its low taxes either.
Unlike just about every other president, including Barack Obama, Trump doesn’t claim Irish heritage and doesn’t seem to care about the Irish vote. The blunt truth is this. Trump’s latest round of tariffs may well kill the Irish economy – and it will be very hard to stop it from happening.
