The tariffs announced by the Trump administration this week came as expected and the consequences will be serious for the Irish and indeed global economy. Since the middle of the last century, the direction of travel for international trade has been charted by reduction of tariffs and even the creation of zones where countries combined to remove tariffs on trade between them altogether.
The tariffs announced by the Trump administration this week came as expected and the consequences will be serious for the Irish and indeed global economy.
Since the middle of the last century, the direction of travel for international trade has been charted by reduction of tariffs and even the creation of zones where countries combined to remove tariffs on trade between them altogether.
The most successful and long established of these has been the EU, which is not only a tariff-free zone between the 27 member countries, but is also a single market, where there is complete freedom of movement, capital, goods and services.
Not only are there no tariff barriers to trade between members, but there are also no non-tariff barriers. Of course, there has been one major blip, with the UK ceasing to be a member from the start of 2021.
In north America, the US, Canada and Mexico have had a tariff-free trade agreement between them since the mid 1990s, which was renegotiated during the first Trump presidency.
This agreement could be described as under suspension at present, as these were the first two countries targeted by the current Trump presidency for tariffs and relations with Canada in particular are particularly bad at present.
US is Ireland’s biggest export market
Given that the US is Ireland's largest trading partner for exports, it is inevitable that we would be particularly badly hit.
The pharma and tech sectors, which are the main contributors of corporation tax to the Irish exchequer, are particularly dependent on the US for exports.
Pharma is excluded from tariffs for now, but could be included in a later review by the US administration.
As we reported in this week's Irish Farmers Journal, most sectors of Irish agriculture escape relatively unscathed.
This is because, apart from butter and to a lesser extent cheese and infant formula, most Irish agri-food exports aren’t to the US.
Whiskey and cream liqueur are linked to Irish agriculture through grain for distilling and milk for cream in the manufacture and they too will be seriously impacted, given that the US is a major export market for both of these.
Brexit parallel
The introduction of import tariffs by the US is what would have happened with the UK had a Brexit deal not been negotiated.
If it was the UK that was imposing tariffs on imports from Ireland, that would have been catastrophic for Irish farmers, given that it is such a major market for exports across all sectors of Irish agriculture.
In fact, trade with the UK for agri food is even more important than trade with the US is for pharma and tech exporters and the problem would have been made worse because the levels of tariffs would have been much higher.
Tariffs were avoided because the UK and EU managed to eventually agree a tariff- and quota-free trade deal when the UK exited the EU and single market.
Non-tariff barriers did return and these frustrate trade and increase the cost of doing business. Sanitary and phytosanitary (SPS) controls are now in place again between the UK and EU borders, with the exception of the border on the island of Ireland.
However, the introduction of, in many cases, additional tariffs by the US this week is a reminder that this is what Brexit might have looked like, only worse, if a deal hadn’t been agreed between the UK and EU.
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