Sailing Into Headwinds
The recent trade actions taken by the Trump administration signal significant challenges to the global trading system. Irish businesses have a unique opportunity to excel in this rapidly changing trade landscape.
By Michael E. Burke, Partner, Arnall Golden Gregory LLP
Opportunity often emerges in times of chaos and adversity; knowing where to look is key. The recent trade actions taken by the Trump administration signal one of the most significant challenges to the global trading system established post-World War II. Free trade, or at least reduced-friction trade, has been a cornerstone of the global economy. However, the introduction of tariffs and the looming threat of additional tariffs are set to disrupt the longstanding economic relationship between the U.S. and Ireland. Despite this volatility, Irish businesses have a unique opportunity to excel in this rapidly changing trade landscape.
While the U.S. has not yet enacted tariffs on the European Union (E.U.) or its member states, the risk of a U.S.-E.U. trade war appears increasingly likely. Any tariffs imposed on Irish-origin products—including critical sectors such as medical devices, pharmaceuticals, food, and beverages—could profoundly impact Irish businesses. In 2024, Ireland exported €72.6 billion (approximately $78.2 billion) worth of goods to the U.S., creating a trade surplus of over €50 billion (roughly $53.8 billion). The current U.S. administration interprets this trade surplus as evidence of unfair competition against American products. Additionally, the U.S. government remains critical of Ireland’s tax structure, asserting that it exacerbates the trade imbalance.
To succeed in this uncertain environment, Irish businesses must proactively seek opportunities and mitigate risks. Here are several strategic measures that can help navigate potential tariff implications:
- Irish companies might consider establishing operations or forming partnerships in the U.S. This would reduce exposure to tariffs on Irish-origin goods. Many U.S. states offer substantial incentives for businesses willing to set up manufacturing operations locally. Companies in Ireland can also look to contract manufacturers, especially within the life sciences sector, to produce goods in the U.S. and thus avoid tariffs.
- Irish businesses must reevaluate their existing contracts and pricing agreements to build in flexibility for potential tariff-related cost increases. This review should include using appropriate INCOTERMS to manage risk between buyers and sellers effectively. Also, pricing strategies should clearly state that quoted prices do not include tariff charges. It’s important to note that in the U.S., force majeure clauses cannot be invoked concerning tariff increases.
- Emphasizing ‘Brand Ireland’ is vital, particularly as Ireland ranks as the seventh-largest foreign direct investor in the United States. Many components in American products, especially in the life sciences sector, originate from Ireland and cannot be easily replaced with U.S.-sourced options. Utilizing the Irish diaspora to advocate for favorable trade policies can also be a powerful asset.
As we look ahead, it’s clear that tariffs will exacerbate inflationary pressures within the U.S. economy. Inflation typically results in the depreciation of the relevant currency—in this case, the U.S. dollar—against other currencies like the Euro. Such depreciation and inflation can lead to downward pressure on the U.S. stock markets and make acquisitions in the U.S. relatively cheaper than before tariff imposition.
Trade disruptions are indeed unavoidable, but they need not spell disaster. Irish businesses with foresight and strategic intent can convert challenges into competitive advantages. Proactively managing tariff risks and adapting to a shifting trade environment will empower Irish companies to thrive in the U.S. market, even amid protectionist policies. By seizing these opportunities, Irish businesses can effectively navigate the complexities of today’s global trade landscape.
