Exports of pharmaceuticals and chemicals from Ireland to the US could decline by about half if the Trump administration applies a 20% tariff on the sector and the European Union does the same, according to the Tánaiste.
Tánaiste Simon Harris brought a memo to the Cabinet detailing the potential economic impact for Ireland ahead of the expected decision by the United States to introduce tariffs on EU countries from as early as tomorrow.
Ireland exports up to €58 billion in pharmaceuticals and chemicals to the US annually and, overall, some 32% of the country's total goods exports go to the US market.
Ministers are due to hear that the EU is operating on the basis that a 20% blanket tariff will be initially applied to all EU countries by the Trump administration.
However, a large amount of uncertainty remains on whether sector or even country-specific tariffs might be applied.
Mr Harris said threatened tariffs by the US and reciprocal tariffs by the EU could result in a "significant reduction of around half in the amount of pharmaceuticals we are exporting" to the US over a five-year period.
Mr Harris qualified this by saying that "all of this is quite volatile and subject to change".
Speaking on his way into a Cabinet meeting, Mr Harris said Ireland does not want to be "in that space".
"We don't want to be in a space where we are seeing 20% tariffs from the EU, we don't want to be in a space when we see tariffs from the US, we want to be in a space where, as a European Union, where we can sit down with the United States of America," Mr Harris said.
"Our economies are interdependent; it's a trade relationship worth €1.6 trillion between the EU and the US every year. No president of any political persuasion can ignore that reality," he said.
Mr Harris said that the "likely" imposition of tariffs by the US tomorrow was "regrettable in advance of even seeing the detail".
He said it was "really important in the days ahead that the response from Ireland and the European Union is calm, measured and strategic".
Read more: Why the pharmaceutical sector is so important to Ireland
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Mr Harris said that he has been "intensively engaging" with his European counterparts with a view to delivering an "informed response" at an EU trade ministers meeting in Luxembourg on Monday.
He referenced an ESRI report which talked about "up to 80,000 jobs potentially being at risk if the tariffs go the wrong way".
"We are about to face into one of the biggest economic challenges and how we steer the country through these challenges in the days, weeks and months ahead won't just impact us for the next few years, will impact us for the next generation in terms of our economic model."
Ireland and Europe must 'adapt' to tariffs - Taoiseach
The Taoiseach said it is up to Ireland and Europe to adapt to impending tariffs from the US.
Also speaking on his way into the Cabinet meeting, Micheál Martin said the main discussion Ireland was engaged in was how long it would take to adapt to the changes.
"We know tariffs are coming, they will be announced. I would hope that there will be negotiation, but what is clear is that even after negotiation, there will be some level of tariffs still in place. The issue now is how high," he said.
"Then it's a matter for the Irish economy and the European economy to adapt to that. There are a lot of measures we can take, but fundamentally, the old order is changing in terms of the economic model. The issue is the pace of that change, and the degree to which we can adapt to it."
Also this morning, Minister for Public Expenditure Jack Chambers will tell colleagues that the best way to safeguard against the impact of tariffs is to focus investment in public capital projects, as he sets out the steps to review the National Development Plan.
The review will cover public capital investment for the period to 2030 and will use all State funds, including the escrow funds from the Apple case, the Infrastructure, Climate and Nature Fund, and the proceeds of the AIB share sales.
'Govt taking three-step approach' - Donohoe
Minister for Finance Paschal Donohoe has said that the Government is taking a three-step approach in its approach to the potential US tariffs.
Speaking on RTÉ's News at One, he said: "First is the efforts that the Tánaiste Simon Harris is spearheading on our behalf, with other trade ministers, with the Commission, regarding what the response of the EU is.
"Secondly, it's the work that Minister [for Enterprise] Peter Burke is doing regarding additional steps that we can take to improve the competitiveness of our economy.
"Thirdly and critically, it's the work that Minister Jack Chambers is doing with regard to the National Development Plan and how we can invest more in energy and water that, in particular, matters to our very large employers."
The minister added that these measures could be taken over a number of years. He also said that Europe does need to respond to the US tariffs, and it will, but it will be conducted in a "calm and firm manner".
'All options are on the table' in US tariffs response - EU chief
Regarding financial supports being put in place for industries impacted by the tariffs, Mr Donohoe said that the first step is to engage with the EU and the US to see if harm can be mitigated.
"Through the IDA and their engagement with companies that are affected by this, we will look at how we could assist in new markets being found in assisting these companies, for maintaining their exports and businesses within the European Union," he said.
"The truth is that no government entirely can compensate a company or their employees for a significant reduction in trade to an economy as big as the US."
