EXPLAINER: What are tariffs and how will they impact Ireland?

US President Donald Trump has sent shockwaves across the global economy following the announcement of "reciprocal tariffs" on multiple countries worldwide, including Ireland.

Declaring the Tariffs on Wednesday, Trump said this was "the most important days, in my opinion, in American history", and that it was a "declaration of economic independence for the US".

"I will sign a historic Executive Order instituting reciprocal tariffs on countries throughout the world", said Trump. "Reciprocal, that means; they do it to us, and we do it to them."

From the iconic rose garden in The White House, Trump produced a large chart detailing the tariffs he would be imposing on several countries including 34% on China, 46% on Vietnam, 10% on the UK and 20% on the EU.

What are tariffs?

Tariffs are taxes on goods from one country being imported into another country. The taxes, or tariffs, are levied against the importer and charged as a percentage of the overall worth of the goods.

These tariffs are meant to work as an incentive to encourage companies within a country to source materials and workforce domestically rather than internationally.

Trump has repeatedly said he wants US companies back in the US from cars to pharmaceuticals, believing this will strengthen economic and employment growth and raise living standards of the American people, however economic experts say this will most likely push up inflation and impede economic growth.

He called these "reciprocal tariffs", meaning he aims to match tariffs imposed on US exports in several other countries i.e. 10% for the UK, but he has imposed much larger tariffs on countries he believes have the "worst trade balances" with the US.

What does this mean for Ireland?

As Ireland is an EU member, 20% tariffs will automatically apply to goods imported from Ireland to the US. Total Irish exports were valued at €223.8 billion last year, with roughly one third going to the US.

Earlier this week, threats of these tariffs on Ireland's pharmaceutical industry sent worry across the sectors as the industry currently employs approximately 45,000 people across the country.

Of the €72.6 billion in US imports from Ireland, approximately €58 billion relates to pharmaceuticals and chemicals.

It had been projected this could halve if Mr Trump had implemented a 20% tariff on the goods and the EU had responded in the same vein.

Surprisingly, no such tariffs have been implemented on the industry, as of yet, despite both Trump and his Commerce Secretary Howard Lutnick previously focusing on Ireland’s moves to attract that sector.

During Micheál Martin's visit to The White House for St Patrick's Day, Trump said,

"We're gonna be doing tariffs on pharmaceutical in order to bring our pharmaceutical industry back. We don't make anything here, in terms of drugs, medical drugs, different types of drugs that you need...medicines.

"It's in other countries. Largely made in China. A lot of it made in Ireland. Ireland was very smart...we love Ireland. But we're gonna have that."

The Trump administration could still impose such tariffs at a later date, with Trump saying he doesn't blame Ireland for giving the US companies incentives to do business in Ireland rather than the US, but that he blames the Biden administration for letting it happen.

European Commission President Ursula von der Leyen said it was a "major blow to the world economy", and "the consequences will be dire for millions of people around the globe, in particular, the most vulnerable citizens."

Ms Von der Leyen has stated the the EU was ready to negotiate with the US before using retaliatory measure in the form of higher tariffs imposed on the US as analysts say there is little to be gained from an all-out trade war, for the US or other countries.

What imports from Ireland will be affected by the tariffs?

A 20% blanket tariff has been imposed on Ireland to include imports of aluminium and steel, foreign made cars and Irish dairy and whiskey.

Trump added that the EU imposes 39% on all imports coming from the US so 20% is a "kind reciprocal tariff".

Ireland's reaction

Government leaders and industry sectors have said the imposed tariffs could have 'devastating impacts' across the country.

The Irish Whiskey Association has said the new tariffs could have devastating and long lasting impacts on the drinks sector with the US representing a huge 41% of Irish drink exports every year, with a total value of €865 million annually.

It also highlighted a 450% growth in the combined US and EU spirits sector under a tariff-free system between 1997 and 2018.

Taoiseach Micheál Martin has said there was "no justification" for such tariffs and Ireland will now reflect with the EU on how to proceed.

"Now is a time for dialogue, and I believe that a negotiated way forward is the only sensible one. A confrontation is in no one's interest.

"By working with Irish-owned companies, multinationals, our EU partners and bilaterally with the US, we can and will weather this storm."

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