A sign for US pharmaceutical giant Johnson and Johnson in Ringaskiddy, near Cork, southern Ireland, an area which has attracted many US pharma giants in recent years (Peter MURPHY) <\/p>\n
The deal between the United States and the European Union may have averted a transatlantic trade war, but worries persist in Ireland where crucial sectors are dependent on US multinationals.<\/p>\n
Attracted primarily by low corporate taxes, huge pharmaceutical firms like Pfizer, Eli Lilly, and Johnson & Johnson, and tech giants like Apple, Google, and Meta have based their European headquarters there.<\/p>\n
The US investor influx has boosted Irish tax coffers and fuelled record budget surpluses in recent years.<\/p>\n
But President Donald Trump’s tariffs — a baseline rate of 15 percent on EU exports will apply across the board — present a stress test for the Irish economic model.<\/p>\n
Once one of western Europe’s economic laggards, Ireland became known as the “Celtic Tiger” thanks to a remarkable turnaround in the 1990s.<\/p>\n
A model built on low corporate tax and an English-speaking workforce in an EU country proved seductive to foreign investors, particularly from the US.<\/p>\n
Their presence drove rampant economic growth and would later help Ireland rebound from the financial crash of 2008.<\/p>\n
The transition was an “Irish economic miracle,” said Louis Brennan, professor of business studies at Trinity College Dublin.<\/p>\n
“Ireland has advanced in a matter of decades from being one of the poorest countries of northwestern Europe to being one of the most prosperous,” he told AFP.<\/p>\n
Last year Ireland hiked its corporate tax rate from 12.5 to 15 percent after pressure from the Organisation for Economic Co-operation and Development (OECD), but still anticipates a budget surplus of 9.7 billion euros for 2025.<\/p>\n
Ireland’s “spectacular” transformation “may have been too successful because we are very dependent in many ways on American companies,” says Dan O’Brien, director of the IIEA think tank in Dublin.<\/p>\n
– Pharma in frontline –<\/p>\n
Spared from the first round of Trump’s tariffs, pharmaceutical companies are now being targeted by the American administration, keen to repatriate production to home soil.<\/p>\n
Earlier this month the US president threatened a 200 percent levy on the sector. <\/p>\n
Irish Prime Minister Micheal Martin expressed mixed feelings at Sunday’s 15 percent deal, welcoming that “punitively high tariffs” were avoided.<\/p>\n
But “higher tariffs than there have been” will make transatlantic trade “more expensive and more challenging,” he added.<\/p>\n
The new 15 percent levy sealed will be “particularly unwelcome in Ireland,” O’Brien told AFP.<\/p>\n
“The pharmaceutical industry is very large relative to the size of the economy, and in recent times around half of its exports have gone to the United States,” he said.<\/p>\n
Story Continues <\/p>\n
Pharma employs about 50,000 people and accounted for nearly half of Irish exports last year, reaching 100 billion euros, up by 30 percent year-on-year.<\/p>\n
“Ireland’s problem is that it is uniquely integrated into the United States economy,” said O’Brien.<\/p>\n
“There’s no other European country like this. So Ireland is caught in the middle,” he said.<\/p>\n
Official data Monday showed that Ireland’s economic growth contracted in the second quarter, a consequence of Trump’s tariff threats.<\/p>\n
Gross domestic product shrank 1.0 percent in the April-June period on reduced exports by multinationals, government figures showed.<\/p>\n
It had expanded 7.4 percent in the first quarter as companies ramped up exports to the United States in anticipation of Trump’s tariffs.<\/p>\n
Large pharmaceutical companies, particularly American ones, also host certain patents in the country to reduce their tax burden, which then boosts the Irish tax take.<\/p>\n
Tariffs “risk strongly discouraging American companies from setting up their future factories in Ireland,” said Brennan.<\/p>\n
The US could still decide to impose further tariffs on the sector following an ongoing probe into whether pharmaceutical imports pose a national security problem, he said.<\/p>\n
Tech firms with EU bases in Dublin who have also transferred part of their intellectual property rights will not be directly impacted by the imposition of tariffs on physical goods.<\/p>\n
The sector is also a “significant area of investment and employment for Ireland, but at least from a US perspective, it seems outside the scope of the tariffs,” said Seamus Coffey, an economics professor at University College Cork.<\/p>\n
Beyond tariffs, tech could be affected if the United States decides to modify its tax regime to make it less attractive to set up in low-tax countries, said Andrew Kenningham, from Capital Economics.<\/p>\n
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