Tariffs, global tax and more

Background

Given the ever-shifting direction of US trade policy and the speed at which policies are changing with respect to the implementation of tariffs, and more broadly the impact on international trade and tax policies, see below our weekly update on tariffs, global tax and more.

The week in summary 

Following the announcement of the 90 day pause on additional country specific tariffs and the announcement of an increased tariff rate for Chinese goods, further clarity was provided on Friday 11 April in respect of the products within the semiconductor category which were exempted from the “reciprocal” tariff measures imposed on 2 April.

While a 90-day pause is in effect, the 10% baseline tariff applicable to all countries remains in place on imports into the US.

The list of exempted products contains 20 commodity codes and includes electronic devices — like smartphones, iPhones and laptops. While such products are not subject to the “reciprocal” tariffs (including the 125% tariff rate currently applicable to China) they remain subject to the 20% additional tariffs imposed on Chinese goods in February and March.

In response to the continued increase in tariffs on Chinese goods, on Friday 11 April, China increased the tariff rate they will apply to US origin goods to 125%. China’s finance ministry advised the increase would take effect from April 12th. However, it added that it would ignore any further US tariff rises on Chinese exports, “given that at the current tariff level, there is no market acceptance for US goods exported to China”.

EU response 

Following the announcement of the 90 day pause by President Trump, the EU Commission also announced a 90 day pause on countermeasures which it was due to impose on US goods starting from 15 April. This pause will remain in effect until 15 July.

On 14 April, the EU published the list of products which would be subject to these countermeasures. While the products under scope of these measures remain broadly similar to what was previously published, certain dairy products and US whiskey were removed from the list.

Irish Government reaction

Prior to President Trump’s announcement of the temporary suspension on additional tariffs, the Taoiseach, Micheál Martin T.D. and the Minister for Finance, Paschal Donohoe T.D. addressed the Dáil on Wednesday afternoon regarding the 2 April tariff announcement by the US administration and the EU’s potential response.

In his Statement, the Taoiseach noted that the announcements on tariffs made by the US administration on 2 April are deeply concerning and regrettable and stated, “They have had an immediate and negative impact in global financial markets, but the medium to long term consequences for the world economy will be grave indeed if solutions are not found.”

The Taoiseach highlighted that we have yet to see the approach the US will take on pharmaceuticals, semi-conductors and other sectors excluded from the reciprocal tariffs. In relation to the pharmaceutical sector the Taoiseach said, “As we have seen in Ireland, it involves exceptional expertise, long-term research and innovation; very significant investment in high-tech plants that can produce to exceptionally high standards; a skilled and dedicated workforce; and, most importantly, patients, people who cannot afford to see the price they pay soar or to have supply of vital medicines interrupted.”

Minister Donohoe noted that President Trump has also outlined his intention to introduce tariffs on pharmaceuticals. He stated that this sector is extremely important to the Irish economy and the Government will monitor the situation closely.

The Minister summarised that the overall impact of these tariffs will be lower trade, lower living standards and lower growth. The Minister confirmed that the EU stands ready to negotiate with the US administration on tariffs, and that dialogue and de-escalation is the best path forward at this point.

Section 232 investigations 

An investigation into the national security implications of both pharma and semiconductor imports has been underway since 1 April according to a Federal Register filing released by the Trump administration.

The US Department of Commerce initiated a Section 232 investigation, on 1 April, targeting the following:

• pharmaceuticals and pharmaceutical ingredients, including finished drug products, medical countermeasures, critical inputs such as active pharmaceutical ingredients, and key starting materials, and derivative products of those items;

• semiconductors, semiconductor manufacturing equipment, and their derivative products.

The US Commerce Department will examine topics such as the demand for these products in the U.S., the role of foreign supply chains, the extent of domestic production and the feasibility of increasing domestic production among other relevant factors.

Public comments on the issue will be open for 21 days following the official publication on 16 April. The findings from this investigation may then lead to tariffs being imposed on the products under scope as President Trump has used findings from previous Section 232 investigations to support the recent 25% tariffs on steel, aluminum and the auto industry.

Business activity 

Notwithstanding the 90-day pause, with the baseline tariff still in effect, we are continuing to work with companies across all sectors, particularly those with global supply chains, to understand the impact which the US tariffs continue to have on their business. Key activities continue to focus on tariff duty assessments, mitigation strategies, future planning opportunities and keys to implementation.

We’re here to help you

Keeping up to date with US trade policies, trade agreements and new and existing tariff reviews which may lead to further tariff measures is crucial to assessing the risk to your supply chain and the impact these tariffs may have. Understanding your product portfolio and the impact that tariffs may have on your imports is an important first step. We are here to support your business with this analysis and navigating these choppy waters.