Politics

US-Ireland trade deficit: what is it and what difference could Trump’s policies make?

Switching production sites can be a lengthy process for companies, particularly in pharma

Donald Trump's administration argues that having a trade deficit with another country is a sign that the US is being exploited by that country. Photograph: Anna Moneymaker/Getty Images
Donald Trump's administration argues that having a trade deficit with another country is a sign that the US is being exploited by that country. Photograph: Anna Moneymaker/Getty Images
Cliff Taylor's picture
Cliff Taylor
Mon Mar 10 2025 - 06:00

What is a trade deficit?

It is when a country imports more from another country than it sells to it in exports. So the US has a big trade deficit in goods – which are physical products – with Ireland, and also with the EU overall. Trump argues that this is due to unfair trade practices by the EU.

[ Ireland has large trade deficit with US, new CSO figures show ]

What about trade in other areas?

The position is reversed in services trade, where the US has a big surplus with Ireland. This is due in large part to big payments from US multinational subsidiaries here back to their American parents. This relates to the use by the Irish subsidiaries of patents, copyrights and licences developed in the US. There are also investment flows both ways, including significant spending in the US by Irish companies, such as CRH and the big dairy firms.

So the overall picture is more balanced than the headline US trade deficit with Ireland in goods?

Yes. But it is this goods deficit that the Trump administration is focusing on. As well as the fairness argument, Trump also wants key products such as expensive drugs and semiconductors to be made in the US for security-of-supply reasons.

Where does Ireland rank in terms of the trade deficit?

There are different ways of measuring trade flows and Irish and US data diverge a bit. But looking at the US official statistics, they show that the US had a deficit in goods trade of almost $87 billion (€80 billion) with Ireland last year. This is the fourth largest with any other single country.

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This figure has grown sharply in recent years. By far the biggest contributor is the pharma trade, where expensive drugs and ingredients are made in Ireland by American multinationals and exported back to the US market.

Why is this important?

The Trump administration argues that having a trade deficit with another country is a sign that it is being exploited by that country. So a key goal of Trump’s policy is to cut the deficit by encouraging American companies to supply the US market by manufacturing at home. He also wants to boost US exports.

Can Trump’s policies really cut the deficit?

He has threated to impose tariffs, which are special import taxes, to achieve this. He hopes this would encourage American multinationals to move production back to the US from abroad. However, this takes time.

Big US car companies who have plants in Mexico and Canada cannot move them in a few weeks. In pharma in particular, switching production can be a lengthy process as major investments take time and require regulatory approval. It can happen a bit more quickly if companies have spare capacity in the US.

What can Ireland do?

It can underline the value of the overall economic relationship between Ireland and the US and how US companies have done very well here. Ireland can perhaps also try to import a bit more from the US – for example LNG for a new planned storage facility. But cutting the deficit really comes down to decisions made by companies on where to invest and produce.

As well as tariffs, Trump can also use tax policy to achieve this, or just pure economic muscle and hectoring.