Ireland in for choppy ride as Trump tariffs mount​

As one of Europe’s out-performing economies, and home to many leading multinational corporations, Ireland boasts a strong business environment and fiscal position. Yet, Ireland’s open economy leaves it sensitive to external shocks.

As an already fragile Europe faces up to a potential trade war, Ireland is particularly vulnerable to US tariffs. Alongside the UK and EU, the US is a crucial market for Irish businesses: The US is the largest export market for Irish companies by far (accounting for 27.6% of exports in 2023) and is Ireland’s second most important market for imports (16.5% of imports in 2023). Ireland is the most dependent of any European country on US inputs: The US weight in domestic added value produced in Ireland stands at 25%.

Having already announced tariffs against China, Canada and Mexico, President Trump announced 25% tariffs on all steel and aluminum imports into the US on February 10^th, and said he was also considering tariffs on cars, semiconductors and pharmaceuticals. If implemented, the tariffs against China, Canada and Mexico alone would see the US global effective tariff rate rise from 2.5% to 11% – the highest level since the 1940s.

With its large trade surplus, Europe is also in the crosshairs. In 2023, the US trade deficit with the EU reached USD220bn, with Ireland accounting for nearly a third of the total, the second biggest contributor behind Germany (39%). By sector:

• Chemicals and pharmaceuticals has the largest deficit at USD95.5bn,
• Machinery and electrical equipment at USD68bn, and
• Automotive at USD44bn.

In the case of Ireland, pharmaceutical exports to the US represent a hefty 15% of the country’s total exports, the largest of any single sector in Western Europe by some distance.

Europe is likely to retaliate to any US tariffs. We estimate that reciprocal tariffs of 25% would cut -1.0pp off Eurozone GDP growth over 2025-26, with pharmaceuticals, machinery & equipment and auto suffering the most. However, with so much at stake, we think an all-out trade war unlikely. Lower European tariffs on US cars and agricultural goods, alongside increased spending on US defense and energy exports are likely concessions. But even a contained trade war would be negative for the Eurozone, as prolonged uncertainty would affect economic confidence, lowering GDP growth by -0.2pp to around 1% in 2025.

Tariffs, alongside other likely policies aimed at encouraging businesses to relocate or shift operations to the US, could see businesses in sectors like technology and pharmaceuticals downsize or move out of Ireland. At the same time, businesses in key export sectors like food and beverages, manufacturing and life sciences are vulnerable to large swings in US trade tariffs.

The ultimate scope of Trump’s tariffs on EU inputs remains to be seen, but a full-blown trade war would have consequences for business and the Irish economy, explains Dean O'Brien, Country Manager Allianz Trade Ireland

“Many of the top exporters in Ireland are US companies, and if some were to move outside the EU, it could have a significant effect on demand and employment in Ireland, as well as impact suppliers, especially those smaller businesses that feed into the local economy. Winners and losers will, however, will depend on the sector and target market. Irish businesses focused on the domestic market, for example, are likely to fair better than those reliant on US exports and companies,” he says.

Ireland’s attractive low-tax environment, a key driver behind the sizeable presence of multinationals in Ireland, may also come under pressure. The introduction of the minimum global corporate tax reform, which will see the tax rate for very large companies rise from 12.5% to 15%, is expected to modestly dampen Ireland’s attractiveness, particularly for multinationals. Furthermore, a further decrease in taxation in the US under the Trump administration may erode Ireland’ competitiveness.

To offset the shock, businesses could look to new or high-growth markets. However, tariffs are also likely to impact already fragile markets in the Eurozone: Export-led Germany, Ireland’s third largest export market (10.4% of total exports in 2023), would be hit hardest by a trade war. Finding new clients and suppliers, however, comes at a cost and is far from straightforward. Rerouting, for example, will prove difficult as US trade agreements would require the origin country to improve or transform the product to avoid tariffs.

Impacted firms could also look to increase local production in the US, or invest in cost-cutting measures such as automation. However, these require investment and offer little results in the short-term. Cutting prices in the US market may be a quick fix to stay competitive, but some sectors have very low margins to compete on prices. All in all, adjusting to tariffs will put business under additional financial pressure at a time when many are already fragile: Business insolvencies in Ireland picked up significantly in 2024, rising +36% year-on-year at Q3 2024.

The threat of tariffs also adds to already mounting uncertainty for businesses. According to the 2025 Allianz Risk Barometer, a survey of over 3,700 companies from 106 countries, businesses face a series of challenging and interconnected risks in 2025. Cyber and business interruption topped the survey’s ranking of risks businesses fear most, although respondents in the UK and Ireland also cited changes in legislation, political risks and macroeconomic developments among the risks of most concern.

Supply chain disruption remains an ongoing problem for Irish business. Storm Darragh in December 2024 caused the six-week closure of the ferry port at Holyhead in North Wales, a key transit point between Ireland and the UK (the UK is Ireland’s biggest market for imports and second largest for exports). While many businesses have adapted to post-Brexit trade, Holyhead remains an important part of the UK land bridge, which connects the Republic of Ireland to the rest of the EU.

Disruption to shipping in the Red Sea, along with extreme weather events, are causing significant delays in imports and exports for many Irish business, explains Ross Follis, Broker New Business Underwriter at Allianz Trade in UK & Ireland.

“The closure of Holyhead over the Christmas trading period has had a significant impact on businesses in Ireland, causing a huge backlog and hitting supply chains in both countries. At the same time, rerouting of container shipping due to the conflict in the Red Sea and Middle East is causing delays and additional costs for goods into Ireland. We hear from many businesses reports of supply chain disruption and difficulties in getting goods and materials in or out of the country,” he says.

At a time of heightened risk and volatility, trade credit insurance provides security against unpaid debts, and can help mitigate the domino effects of business interruption and supply chain disruption. It can also support companies as they enter or expand in new markets, providing insights and intelligence, as well as protection from non-payment.

Sources:

^{The Art of the Deal, how the world should respond to the US tariff threats}

^{Global Insolvency Outlook:The ebb and flow of the insolvency wave}

^{Ireland: A regular Eurozone outperformer}