US pharma tariffs could have significant impact on Irish corporate tax receipts
President Donald Trump speaks during a cabinet meeting at the White House in Washington, Monday, March 24, 2025. (Pool via AP)
US President Donald Trump's plan to impose tariffs on the pharmaceutical industry has raised several concerns for the Irish economy, with his punitive measures putting Ireland's lucrative corporate tax receipts at risk.
Speaking this week, the US President said he would try to "bring our pharmacy industry back," calling out Ireland and China specifically as countries benefiting from US companies.
Ireland is one of the largest pharmaceutical exporters in the world due to several large US firms operating manufacturing sites across the country, with their earnings contributing significantly to the corporation tax receipts collected each year by the Irish Exchequer.
Excluding the tax collected from last year's Apple case, Ireland's corporate tax intake rose to €28bn in 2024, up from €23.8bn in the previous year.
However, speaking to the UCC economist and chair of the Irish Fiscal Advisory Council (Ifac), Seamus Coffey said that tariffs on the pharmaceutical industry could have significant consequences for Ireland's future corporate tax intake.
"In the short run, these companies will not just up and leave. They have put millions, maybe billions, into their Irish operations."
"But, what could change is pricing. If a 25% tariff is added to the price of their products, this may give companies scope to change their tax structure, given that the vast majority of transactions are happening within their own company.
"If the price being paid to the Irish manufacturer is lower, given the tariffs, this will make their profit lower, hence, the corporate tax paid by that manufacturer will also fall."
"In the short run, we won't see any major changes in manufacturing, but there could be changes in how much we're collecting in tax from these companies."
Over the past ten years, several major companies have shifted profits over to their Irish subsidiaries as a result of changes made by both the Organisation for Economic Co-operation and Development (OECD) and by the previous Trump administration.
However, given the latest threat of tariffs, Mr Coffey has warned that larger companies may reconsider where they keep their profits and intellectual property in the future to keep costs down.
Mr Coffey added that while there will not be any major impacts on employment or output in the short term, Ireland may see some changes in its value of exports.
At the end of 2024, Irish exports to the US rose to €72.6bn, of which €44.4bn were from the pharmaceutical and medical sector.
According to latest figures from the Central Statistics Office (CSO), exports to the US grew by 81% in January this year, with the US being the largest import market for Ireland in the month.
According to analysis by Bloomberg Economics, Ireland is just behind Mexico and Vietnam and on par with Germany in terms of its trade surplus with the US.
"When it comes to employment and output, I don't see a real near-term threat, but in the medium term, we should be concerned," Mr Coffey continued.
"The concern for Ireland is that you could go five or seven years down the line, when companies' current investments reach the end of their life cycle, what happens to the next round?"
"If these tariffs were to become a permanent feature, the concern would be around the next round of investment."
"US pharmaceutical companies are determining now where to make their investments for the 2030s. Given the current environment and prospective war, Ireland, which has benefited massively from globalisation, could be severely impacted in terms of future growth."
