Ireland has a GDP of just over half a trillion euros. Its exports to the United States amount to approximately 14% of that figure, which is 72.6 billion euros. Of that amount, 69% (50.32 billion) consisted of medical and pharmaceutical products.
Now, this successful economic model based on a 12.5% corporate tax rate is in serious danger due to Donald Trump's tariff threats. Trump has been cautious, largely to avoid losing the support of the Irish-origin vote, which is crucial in the United States. However, the president has stated that Dublin "has the pharmaceutical companies in its pocket."
Even if Washington does not impose widespread sanctions, the size of the Irish bilateral trade surplus is so large that it is almost impossible for the country to escape tariff disaster. Everything depends on what Donald Trump announces in two Wednesdays, which the President of the United States has dubbed "the day of liberation." There may be widespread tariffs. Or it may be limited to just 15 countries, dubbed by Treasury Secretary Scott Bessent as the "dirty fifteen."
Either way, Ireland is in the crosshairs. Furthermore, U.S. threats are expanding. In recent days, Washington has extended its criticism to Dublin's tax model, which Commerce Secretary and strongman in economic policy in Donald Trump's government, Howard Lutnik, has described as an "Irish tax scam."
Initially, it would seem painful for the Donald Trump administration to target tax havens, given its rejection of any form of international taxation on economic activity. However, this line of thinking has been questioned in recent weeks by the president's ultranationalism and his desire to create a self-sufficient economy. Wall Street strongly believes that Trump wants to implement the strategy of his advisor Stephen Miran to compel countries to adopt economic measures that force companies to move from their territories to the U.S.
Ireland, moreover, may fall victim to EU "friendly fire." Because many components of the products manufactured by biomedical companies in Ireland come from the United States. This makes them vulnerable to Brussels' trade barriers. Finally, many EU members have a clear resentment towards Irish tax policies, as companies have established their headquarters in the country to pay lower taxes, so the Dublin government does not have all the support one might expect.
The great paradox is that among the most affected companies would be several U.S. pharmaceutical giants, including the world's largest company in the sector, Pfizer, as well as others like Johnson & Johnson and Eli Lilly.
For Ireland, the threat is significant because it is not just about the decline in exports. Trump's customs barriers would force these companies to move their production to the United States, thus questioning the growth model that Dublin governments have successfully implemented for over three decades.
Permanent tariffs of 25% would shave 9 billion euros off Ireland's GDP and 80,000 jobs in the next seven years, according to a joint study by the Irish Government and the Dublin-based Institute for Economic and Social Research (ESRI). Washington is particularly interested in specifically taxing two types of goods: microprocessors and pharmaceutical products and medical supplies. Ireland falls squarely into the second category.
Thus, Donald Trump has become the biggest threat to the "leprechaun economy," a term coined in 2015 by Nobel laureate in economics, turned political commentator on American politics by Paul Krugman. The leprechaun is a small elf from Irish folklore, associated with luck, mischief, and also wealth. With his fortunate term, Krugman indirectly referred to Ireland's ongoing economic mischief, consisting of skirting the definition of a tax haven to attract investments at the expense, especially, of other EU partners, a practice also applied by two countries that also tend to lecture on economic management and austerity: the Netherlands and Luxembourg.
But the leprechaun economy also has magical elements, especially the statistical distortion caused by export dependence. That is precisely what led Krugman to use the term when Ireland's GDP rose by 27.2% - an impossible figure in the real world - due to the impact of the external sector on the economy.
Now, the tables have turned, and the impact of pharmaceutical companies in Ireland could give the impression that the tariff blow would be greater. In any case, the Irish government is doing everything it can to prevent Trump from carrying out his threats.
Ireland's dependence on the external sector is enormous, making it very vulnerable in a world economy marked by state capitalism. In the success of its growth model, the Irish have their own penance, although, on the other hand, it is difficult to find another economic policy when one is a small country with no natural resources. In 2024, Ireland's exports to the United States grew by 34%.
The leprechaun is a shrewd creature with an almost demonic ability to negotiate in its favor. The Irish have cards up their sleeves. The most obvious one is the affection for the country in the United States, where nearly one in eight citizens claims to have Irish ancestors, and St. Patrick's Day - March 17 - is celebrated almost as an official holiday, with a reception at the White House and massive green-clad revelers in the streets. Now, Ireland must use that sympathy to ward off Donald Trump's tariffs.