US President Donald Trump's announcement of a 20% tariff on imports from the European Union, including Ireland, has huge consequences.
Irish impact
Ireland has the biggest exposure to exports to the United States of any EU member state.
Increasing the price of these products by one fifth is a significant step.
Employers' group Ibec calculates it could lead to a 2% to 3% drop in Ireland's overall exports.
The US is Ireland's third largest trading partner for goods.
Pharmaceuticals
Donald Trump did not mention pharmaceuticals in his announcement.
A fact sheet published by the White House said drug products would be excluded from tariffs.
It also listed other products which would be exempt, including steel, cars and automotive parts - which have already been hit with additional duties.
It means pharmaceuticals are exempt for now - but that could change.
Northern Ireland and UK
One interesting aspect of the plan for new duties is that there will be 10% tax on goods from the UK, including Northern Ireland.
It puts the north and Britain in a stronger position.
It means British goods can be exported to the US with lower duties than products from the Republic of Ireland.
If there was any upside to Brexit, maybe Donald Trump has provided one.
EU response
Tomorrow, European Commission President Ursula von der Leyen will announce an initial response from the EU.
It seems the full details of the bloc's counter-measures could come in the next few days.
The most likely is that the EU will simply respond with a list of products which will be hit with reciprocal tariffs.
But there are also a few big tools available to the EU if the trade war worsens.
Firstly, the EU can introduce a digital tax which would hit technology companies.
Secondly, it could impose a tax on pharmaceutical companies which could be difficult for Ireland.
Its third option is to use anti-coercion measures which would allow the EU to suspend intellectual property rights thereby stopping software and streaming companies charging for their products.
It is good to talk
The EU does not really want to impose tariffs on the US.
When it announces reciprocal tariffs it actually wants to encourage Donald Trump to the negotiating table and cut a deal.
This is the first round in this trade war and there is a long road ahead.
