Overview:
The United States and the European Union reached a framework trade agreement on July 27, 2025, averting a potential trade war. The deal was finalised after negotiations between U.S. President Donald Trump and European Commission President Ursula von der Leyen at Trump’s Turnberry golf resort in Scotland.
Tariffs:
The U.S. will impose a 15% baseline tariff on most EU goods exported to the U.S., reduced from a threatened 30% rate.
Certain products, including aircraft, plane parts, some chemicals, generic drugs, and specific agricultural products, will face zero tariffs.
Steel exports face a 50% tariff, with a quota system proposed to mitigate impacts.
EU Commitments:
The EU agreed to purchase $750 billion in U.S. energy products (oil, gas, nuclear fuel, and semiconductors) over three years.
The EU will invest $600 billion in the U.S., including purchases of military equipment.
The EU will reduce tariffs on U.S.-made cars from 10% to 2.5%, boosting U.S. car exports.
Pharmaceuticals:
Initial confusion arose as Trump suggested pharmaceuticals would be excluded from the deal, but von der Leyen clarified they are included under the 15% tariff, with potential for separate negotiations later.
Economic Impact:
The deal provides stability and predictability, avoiding a tit-for-tat tariff escalation.
Markets responded positively, with European stock indexes like Stoxx Europe 600, DAX, and CAC 40 rising on July 28, 2025.
The deal is seen as asymmetric, favoring the U.S., with the EU conceding more, potentially impacting EU GDP by 0.5%.
Next Steps:
The agreement is a framework, with technical details to be negotiated over weeks or months.
EU member states must approve the deal, with potential resistance from countries like France, though no single country can veto it.
Trump is expected to sign executive orders to implement the deal in the U.S., while the EU will create a legal instrument to enforce it.
Implications for Ireland
Economic Context:
Ireland is the EU country most reliant on the U.S. as an export market, with €60.4 billion ($81.1 billion) in goods exported in 2024, particularly in pharmaceuticals, which account for 75% of its U.S. exports.
Tariff Impact:
The 15% tariff on most EU goods, including pharmaceuticals, will increase costs for Irish exporters, potentially reducing competitiveness in the U.S. market.
Sectors like dairy (e.g., Kerrygold butter) and spirits (e.g., Irish whiskey) face uncertainty, as it’s unclear if they will be included in zero-tariff categories. A 15% tariff could significantly impact the €2 billion food and drink export sector.
Aviation is a bright spot, with zero tariffs on aircraft and parts benefiting Ryanair and Ireland’s aircraft leasing industry (e.g., Aercap).
All-Island Economy Concerns:
The deal creates a tariff differential, with Northern Ireland facing a 10% tariff (under the UK’s trade deal with the U.S.) compared to Ireland’s 15%. This could disrupt the all-island economy, particularly for dairy, which relies on integrated supply chains across the border.
Dairy Industry Ireland highlighted risks of added complexity and costs for processors and farmers due to tariff divergence.
Pharmaceutical Sector Risks:
Ireland’s pharmaceutical exports (€44 billion annually) face significant uncertainty due to the 15% tariff and Trump’s push to repatriate pharma production to the U.S. This could threaten the 70,000 jobs and billions in tax revenue supported by the sector.
Trump’s focus on reducing U.S. reliance on foreign pharmaceuticals poses a strategic threat, potentially incentivizing companies like Pfizer and Eli Lilly to relocate profits or operations to the U.S.
Economic and Budgetary Impact:
A March 2025 report estimated a potential €18.4 billion GDP loss (3.7% reduction) for Ireland in a worst-case 25% tariff scenario. The 15% tariff mitigates this but still poses challenges.
The Irish government will reassess its €9.4 billion budget package, initially based on a 10% tariff assumption, to account for the new 15% rate.
Government and Industry Response:
Taoiseach Micheál Martin welcomed the deal for providing “clarity and predictability” and avoiding a trade war, but acknowledged higher tariffs will make trade “more expensive and challenging.”
Minister for Enterprise Peter Burke noted Ireland’s challenging position but emphasized the deal’s role in averting 30% tariffs.
Minister of State Neale Richmond described it as the “least bad option,” highlighting the certainty it provides despite not being ideal.
IBEC chief Danny McCoy called the deal “fairly punishing” for Europe, reflecting concerns about its economic toll on Ireland.
Long-Term Uncertainty:
Ongoing negotiations on sector-specific tariffs (e.g., spirits, dairy) and Trump’s unpredictable trade policies continue to pose risks for Irish exporters.
The deal’s stability is seen as a positive, but Ireland remains vulnerable due to its heavy reliance on U.S. trade and investment.
This summary reflects the latest available information as of July 28, 2025. Further details on sector-specific impacts, particularly for pharmaceuticals and agri-food, are expected to emerge as negotiations continue.