EU and US Forge Trade Deal, Easing Tensions for Ireland

The recent outline trade deal between the EU and the US has effectively averted an impending trade war, which could have had serious ramifications for various economies, particularly Ireland. The agreement comes after tensions escalated when US President Donald Trump threatened to impose tariffs of up to 30 percent on EU imports starting August 1, 2025. In response, the EU had prepared its own list of goods subject to tariffs, setting the stage for a damaging tit-for-tat escalation.

This deal is especially significant for Ireland, which heavily depends on US investment and trade. A trade conflict could have endangered the operations of major digital technology companies that have established significant bases in the country. The current agreement allows businesses to operate with a clearer sense of stability, which is crucial for maintaining investment momentum.

While the specific terms of the deal are still being clarified, the agreed tariff of 15 percent is notably higher than the average tariff of just under 5 percent on all EU imports to the US prior to Trump’s administration. Irish businesses, already navigating a complex landscape of varying tariff rates, will need to analyze how this new rate compares to existing tariffs, particularly those implemented after the so-called “Liberation Day,” when additional 10 percent tariffs were introduced.

Reports indicate that this 15 percent tariff may be “all-inclusive,” meaning it would not stack on top of existing tariffs, which would provide some welcome relief to businesses. The EU has also signaled discussions around “zero for zero” agreements in specific sectors, potentially benefiting Irish exports in areas such as beverages and agri-foods.

The pharmaceutical sector is another critical area for Ireland, though there remains some ambiguity regarding its treatment under the new agreement. European Commission President Ursula von der Leyen stated that the pharma industry would fall under the reciprocal tariff cap. However, the Trump administration has been scrutinizing key sectors like pharmaceuticals and semiconductors for national security reasons, which could lead to higher tariffs on EU pharma exports to the US in the future.

Trump has reiterated his commitment to bringing pharmaceutical investment back to the US, raising concerns that tariffs could be used as leverage to encourage companies to relocate operations away from countries like Ireland. Despite the improving mood between the EU and US, the potential for increased tariffs remains a significant concern for Irish businesses.

In the broader context, Trump is establishing baseline tariffs of 15 percent for many countries, aiming to bolster US government revenue. This strategy, while beneficial for the US treasury, could adversely impact those who depend on US imports, leading to increased costs for businesses and consumers and contributing to rising inflation.

While the immediate threat of a trade war has been quelled for now, uncertainties linger, particularly given Trump’s unpredictable approach to trade policy. For Irish businesses, the current stability is a welcome reprieve, but ongoing vigilance will be necessary as the landscape continues to evolve.