COLUMN: Dodging the tariff bullet

FOR the moment, the pharmaceutical industry has managed to dodge the bullet of the US trade tariffs which, at the very least, seem designed to create havoc with the global trading order. The collective sigh of relief here in Mayo, where four thousand direct jobs and as many more in subsidiary employment are dependent on the pharma industry, has been palpable. How long that reprieve will last is anybody's guess, but for now, the evil day has been staved off , despite renewed dark mutterings from Washington of impending levies.

There are several differing opinions as to why President Trump - up to now a strident critic of US pharma investment in Ireland - spared the guillotine on pharma while imposing a 20 percent levy on everything else imported from Ireland. The main theory would suggest that imposing high drug costs on the US healthcare system, the biggest consumer of such products, would have serious consequences for the American health budget. Given the negative market response to the new tariff regime, and Wall Street's decisive thumbs down for the Trump trade agenda, there is reason to hope we have avoided the worst and that political pragmatism, while not exactly a White House strong point, may win out over performative showboating. At worst, there is hope that the threatened tariffs on pharma could be bargained off by the EU in negotiation with Washington, an outcome which the deal-loving Trump might be open to. He too must realise that the goal of relocating the pharma industry back to the United States would be so disruptive as to be unachievable within the presumed four year time span of his second reign.

In the next few days, we will learn of the EU response to the tariff crisis. The Brussels reaction to date has been measured, and there was no attempt to match drama with drama, a response which Mr Trump would have relished. Rather there has been a more sober, strategic assessment, the better to allow time for a response which will facilitate the needs of European member states. Whether, as some observers note, this is more like making a virtue out of the necessity of calibrating the different interests of individual member states, then so be it. And if it means avoiding the driving of a wedge between EU neighbours, each of which has its own national priorities in pursuit of a common agreed objective, then all the better for EU cohesion. Even within our own island, the imposition of 10 oercent on northern Ireland exports, as against 20 percent on those from the Republic, could prove as divisive between communities as it is advantageous for the North.

Such is the deep hostility towards Europe of the Trump administration that any splintering of Brussels resolve would be gleefully welcomed in Washington. The cohesion of the Euro twenty seven is fragile enough that - as much by accident as by design - Trump's trade policy could strain relations within the group to breaking point. Quite why the US should have developed such an antipathy to its oldest ally is an open question, but then, rational thinking is not an obvious White House trait. The MAGA view that Europe has become a home for wokeness and a refuge for unrestrained immigration is just one of the reasons why its leaders are held in such contempt in Washington.

Closer to home, for Micheál Martin and his government, the stark reality remains that the old order has changed, and that the days of being awash with corporate tax revenues are over. And while austerity may be yet too strong a word for what is looming in the distance , the era of untrammeled government spending , of 'one-off' giveaways on Budget day, of exchequer surpluses enough to sustain the putting away of rainy day billions, is over. The repeated warnings of grim faced economists that half of all government income over recent years has been windfall in nature may come to pass sooner than we expected.

When the present government was returned to office late last year, the sun was shining and the financial sky was blue. A contented electorate saw no need to change a winning horse; in the words of a former British politician, the public never had it so good. But that was then. The music has changed, and any return to austerity will sour the mood of a public which can be fickle enough when the colder winds start to blow.

Trump's tariffs are designed to disrupt the world economic order and to turn the conventional on its head. They could prove equally troublesome for national governments which will now have to learn to cut the cloth according to new measures.