The US administration’s anticipated increase on universal tariffs were announced at 1600 (EST) yesterday as 20% tariffs on imports to the US from the European Union were formerly confirmed. Pharmaceutical products will not be covered by this initial round of tariffs but they may be impacted by separate sectoral tariffs which are expected to be announced in the coming weeks. RSM Ireland has since urged Irish government and businesses to be measured in their immediate response to allow bilateral negotiations to play out.

According to the leading audit, tax and consulting firm, this is likely just the start of a prolonged period of economic uncertainty around trade and tariff policy. The recently announced tariffs will be subject to change as negotiations take place and the impact on Ireland, the UK and Europe, as a whole, will partly depend on the response from those governments.

As the negotiations take place and governments and businesses assess the impact of the evolving position, James Burrows, Corporate Tax partner at RSM Ireland, comments: “The reaction of the Irish government and wider EU will be important. Cool heads in the immediate near term will be critical in ensuring the many nuances and outcomes of the ensuing bilateral negotiations are factored into any medium to long-term investment decisions.”

Thomas Pugh, economist at RSM UK and RSM Ireland, comments: “There are three broad points we can make as we digest the full details and wait for responses from other countries. First, uncertainty around tariff and trade policy is anathema to business confidence and drags down consumers. Even if the worst of the impact of tariffs are eventually avoided through negotiation, increased uncertainty will weigh on global economic activity, dragging down economic growth in Ireland and the EU.

“Second, it will take time for the full impact of tariffs to be realised. Companies cannot just switch supply chains overnight, especially on sensitive materials like pharmaceuticals. The result in the short term will be higher prices. The impact on economic on growth will be a longer-term issue.

“Third, much of the negative impact will come from retaliatory tariffs if the EU engages in a tit-for-tat trade war that raises inflation and depresses growth. But Ireland is potentially more vulnerable to US tariffs than many other countries as exports to the US make up a much larger share of the economy than other countries. What’s more, the Irish budget surplus relies on corporate taxes from multinational corporations. While this arrangement won’t be immediately impacted by the tariffs, it’s clearly in the cross hairs.”