Every year, thousands of kegs leave the behemoth gates of St James’ Brewery and sail across the pond to our American cousins in the west. Indeed, the black stout makes up a sizeable sum of the €1.1 billion worth of alcohol exports sent from the European Union to the U.S. each year. Of course, this may change now, given the new economic tempest brought about by President Trump’s tariffs, but perhaps not as badly as first thought. The new trade agreement recently reached between the economic superpowers does bestow a certain level of certainty for markets, but how much so? And will it grant much relief to our own island nation?
The Good
Perhaps the best news out of the agreement struck in Scotland last July is that European economies now have a certain level of confidence in what the future may herald. The baseline 15 percent tariff set on European exports is far from ideal, but it is a better alternative to the trade war that the European Commission had been preparing for since the first announcement of tariffs on “Liberation Day” in April. One need only look to the plethora of countries that were unable to establish a trade agreement with President Trump before the August 1st deadline, from Switzerland to South Africa, and who now face hefty duties of between twenty-five and fifty percent. It should also be noted that a number of key sectors were spared and, in fact, had pre-existing tariffs reduced. So-called “strategic products” such as aircraft components, certain chemicals, and particular agricultural exports were taken out of the Americans’ scope, and the likes of steel and aluminium tariffs have been reduced from fifty percent in order to combat what the EU calls “global overcapacity” of such goods. Thus, there exists at the very least a silver lining.
The Bad
But of course, a tariff is a tariff, and it indeed will negatively impact the EU economy. Capital Economics suggests that the bloc’s GDP will take a half-percent hit, which for a common market worth seventeen trillion euro is not exactly slim pickings. Indeed, the Department of Finance here have stated that whilst jobs will continue to be created, the Irish economy will suffer from reduced growth. It also complicates business with Northern Ireland, whose exports are tariffed at ten percent as a result of the UK’s own trade agreement with the U.S., and sectors such as agriculture, which consist of operations on both sides of the border. It should also be noted that the final agreement must be signed by all twenty-seven European member states and many of whom have already expressed grievances with the deal. Hungarian Prime Minister Viktor Orbán, for example, proclaimed President Trump ate President of the European Commission Ursula von der Leyen “for breakfast”. French Prime Minister Francois Bayrou also spoke out, stating that with the deal, the bloc “resigns itself to submission”.
And The Ugly?
But perhaps the greatest area of concern for Ireland was the agreement’s impact on the pharmaceuticals industry. The European Commission initially stated that such exports are subject to a fifteen percent charge, but that was subject to Section 232 investigations. Such refers to the ongoing examination of pharmaceutical imports by the U.S. government as to whether such goods are detrimental to national security. It is especially worrying that little more than a week after the announcement of the agreement, President Trump stated that the fifteen percent rate would only apply to such one hundred and fifty percent and then two hundred and fifty percent. This, of course, could’ve been another strong-arm strategy by the Don to bully the EU into a U.S.-favoured agreement on the pharmaceuticals, but it nonetheless does not inspire much hope for imports, which are a fundamental pillar of the Irish economy. Worth fifty-eight billion euro according to the CSO, pharmaceutical exports are a huge revenue source and extremely reliant on the U.S. market, with thirty-two percent being U.S.-bound. Thankfully, it now appears that the finalised agreement will subject pharmaceuticals to the flat fifteen percent rate and won’t be affected by the Section 232 investigations. However, whether that remains the case is another issue.
What Next?
As previously mentioned, after the finer details are hashed out by both sides, EU member states will need to agree on the deal before it goes ahead. This, of course, may prove more difficult than it sounds, given the contention over the circumstances of its manufacturing. Regardless, the deal is far better than the thirty percent figure thrown around by President Trump in late spring, as well as the implementation of reciprocal tariffs by the EU. On the latter point, it should be noted that whilst EU imports will be more expensive for American citizens, this will not occur vice versa, and so EU consumers need not worry as much. Nonetheless, whilst confirmation on the status of pharmaceuticals is comforting, one is still wary of whether President Trump will have second thoughts if the Section 232 investigations turn out negatively. Indeed, those pursuing the medicinal vocations in particular may feel weary of the future. Overall, the situation as it stands is not ideal, but it is far better than the alternative that appeared to be on the horizon only a few weeks ago. Unfortunately, when America sneezes, the whole world catches a cold. And there’s no quick-fix drug on the market to remedy that.