A guide to tariffs and what they mean for Ireland

Ireland as a small, open economy that relies heavily on trade with the EU and the US, has long opposed tariffs.

However, with Donald Trump now firmly ensconced in the White House, we are going to have to live with them - or at least the threat of them - for the foreseeable future.

The Government is adamant it is doing all it can to prepare for any potential impacts, but a lot of it is simply going to be bracing the economy for impact.

Public Expenditure Minister Jack Chambers recently warned that tariffs would pose a "serious risk to the Irish economy."

He said any blanket tariffs on the EU - such as those on alcohol threatened by Trump yesterday would be "significantly damaging because our whole economic model is on the basis of international trade."

What are tariffs?

In a very basic sense, tariffs are an additional tax a government puts on goods or services that arrive into its country from abroad.

So, what tariffs has the United States imposed on the EU specifically?

US President Donald Trump has imposed tariffs of 25% on all steel and aluminium imports from the European Union and this took effect on Wednesday as prior exemptions, duty-free quotas, and product exclusions expired.

Yesterday, he threatened to introduce a 200% tariff on wine, champagne, and other alcoholic products from the EU.

What has the EU done in response?

The EU has imposed what it calls "countermeasures" on goods worth up to €26bn.

In response to tariffs on steel, Brussels decided to reimpose tariffs on US goods including bourbon whiskey, jeans and Harley-Davidson motorbikes, which it introduced during the first Trump term and later suspended after talks with his successor, Joe Biden.

Mr. Trump then responded with the 200% tariff threat yesterday.

How badly is Ireland affected?

Right at this present moment, the steel and aluminium tariffs are not the biggest problem, the chief economist of IBEC, Gerard Brady, said.

According to the US International Trade Administration, the US imported 77.4 metric tonnes of steel from Ireland last year.

This is compared to Germany which exported 967k metric tonnes of steel to the United States in 2024.

Alcohol tariffs are a different story, annual exports to the US are valued at €865m, and 40% of global whiskey sales from Ireland go to America.

How could it get worse?

More specific tariffs on pharmaceuticals are what people are really worried about.

Senior figures in the Trump administration have repeatedly flagged their concern with Ireland's trade imbalance with the United States.

Mr. Trump explicitly stated during his meeting with the Taoiseach that he wants to draw pharma companies back to the USA from Ireland.

The pharma sector paid €5.5bn in corporation tax in 2022, 46% higher than the tech sector.

Mr. Brady said the "major part" of the trade imbalance is driven by the pharmaceutical sector, which has an enormous footprint in Ireland.

More targeted US tariffs on certain EU goods such as cars or pharmaceutical products could potentially affect the EU and Irish economy more than blanket tariffs, according to Oxford Economics.

The company said: "Our industry-level modelling suggests that the pharmaceutical and high-tech industries would be the most affected.

"Similarly, smaller, less diversified economies are more exposed. We estimate that Ireland and Central and Eastern European economies will experience the largest hit.

"Opting for targeted tariffs instead of blanket tariffs could exacerbate the impact on some EU industries. We simulated a scenario with 25% tariffs only on metals, cars, and pharmaceuticals.

"We found similar results to our blanket tariffs scenario but with stronger effects for Ireland and Denmark due to pharma, and for Germany and Slovakia due to automotive."

*This article was originally published on BusinessPlus.ie.