A moment of truth for Europe's tolerance of Ireland's tech ties
All going well, I will be on The Tonight Show this evening to talk tech and tariffs. Sharing my thoughts here; please do reply / email me with your own if you think I'm wide of the mark.
The tariff triple threat
The Irish state faces at least three acute tariff challenges; the import taxes to be applied to our goods going into the US / as part of the global supply chain; the risk to investment / growth from uncertainty around the tariffs / a global trade war; and the potential for economic pain from the EU's response to Trump's tariffs.
A clusterfuck, if you will.
Fight fire with services?
The last one feels the most urgent, with Brussels set to announce its counterstrike tomorrow (Wednesday).
According to reporting by Politico and France24, Ireland (allied with Spain and Italy) finds itself squaring off against France (allied with Germany and Austria) over whether to retaliate with taxes on services, especially digital services. This would be bad for Ireland. As France24 point out:
"Backed by Germany and Austria, Paris has been pushing for the EU to consider targeting US services, including digital – drawing fire from Ireland which relies heavily on US investment, particularly in the pharmaceutical and tech sectors."
While the EU has a trade surplus in goods with the US, when it comes to services the inverse is true. As Politico point out:
"The European Union has a €157 billion trade surplus in goods, which means it exports more than it imports, but it runs a deficit of €109 billion in services, including digital services. Big Tech giants like Apple, Microsoft, Amazon, Google and Meta dominate all sorts of parts of the market in Europe."
The EU developed a trade weapon a couple of years ago with Trumpian tariffs in mind - the "Anti-Coercion Instrument" - something Simon Harris has called the "nuclear option" that targets lots of things, including digital services.
You can see why Brussels would want to - at a minimum - shift the narrative to services, never mind inflict some pain where it hurts.
Could Europe think Ireland got off lightly?
This might bring to a head long simmering tensions around Ireland's tech industry; and sympathy for Ireland might be in short supply.
Analysis in the FT over the weekend showed that Ireland appeared to get away lightly with the original Trump tariffs. When they applied the incredibly dodgy tariff calculation to Ireland, if found that we would have faced 42% taxes on imports, 22% higher than we are facing, if we were evaluated as a stand alone country rather than as part of the EU.
They then looked at the effective tariff rate taking into consideration the exports that Trump exempted, pointing out:
"Ireland’s focus on pharmaceuticals, which have been temporarily exempted from tariffs, will keep its effective tariff rate below 5 per cent for now."
Below 4% actually.
This of course ignores that outsized role that trade plays for an economy like ours, and the fact that pharmaceutical tariffs might just be delayed.
Stuck in the middle with...?
But it does put Ireland in the awkward position we have discussed in this newsletter before - reliant on both Europe and the US but not really a priority for either, just as they head into a major clash. (See the below from Jan)
Liz Carolan
I also stand by my recent assertion that what US administration is currently doing is squandering an empire (below).
Liz Carolan
ICYMI: Recent writing
I have had a couple of articles in the paper in recent weeks - including a review of "Careless People", the Facebook memoir, and another on the decline of Chegg.
