(Bloomberg) -- Artisan craft stores jostle with fish restaurants around the harbor of Kinsale on the southwest coast of Ireland. On the town’s edge, earth movers and concrete mixers are at work on a construction site for new housing.
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Long a tourist destination, Kinsale is booming. A chief reason for the town’s vibrancy lies a ten-minute drive away along the winding roads of County Cork. It’s here among rolling hills and lush farmland that Eli Lilly & Co. produces an active ingredient for its blockbuster Mounjaro and Zepbound drugs.
The US pharma giant employs more than 1,200 people on a sprawling campus the size of an 18-hole golf course, creating demand throughout the region for housing, school places and generating revenue for local businesses.
It’s the kind of development that President Donald Trump says the US shouldn’t have allowed to happen.
“This beautiful island of five million people has got the entire US pharmaceutical industry in its grasp,” Trump said at a White House meeting with Irish Prime Minister Micheal Martin last week. While saying he “does not want to do anything to hurt Ireland,” Trump insisted that the trade relationship must be based on “fairness.”
That sounds like a threat to a nation whose economy is built — and thrives — upon its attractiveness to US multinationals. Ireland plays host to the European headquarters of companies including Apple Inc., Salesforce Inc. and Intel Corp., helping the island state to rack up the largest trade surplus with the US of any European Union country except Germany.
It leaves Ireland particularly exposed to Trump’s trade tariffs.
“We have lots of global supply chains that are operating out of Ireland when it comes to goods exports,” said Loretta O’Sullivan, EY Ireland Chief Economist. “The bulk of them are pharma and hence the concern and the exposure there.”
Lilly recently announced a $27 billion investment in domestic US manufacturing as it braces for possible tariffs. But the pain may already be coming for Ireland. If Trump follows through on his threat of 200% tariffs on alcoholic drinks from the EU, then Irish whiskey will take a hit. The US has meanwhile said it will apply reciprocal tariffs worldwide from April 2.
If Washington slaps broader levies on EU goods of even 10%, which is at the lower end of the spectrum floated, they would still be unprecedented for Ireland, said Dan O’Brien, chief economist with the Institute of International and European Affairs in Dublin.
“The impact on the Irish economy, which is by a distance the largest per capita goods exporter to the US in Europe, would be strongly negative,” said O’Brien. “The only real question is how much damage they would do.”
The Irish government is responding with a St. Patrick’s Day offensive.
The White House visit by the prime minister, or Taoiseach, was merely the first and highest profile in a series of efforts to leverage the enviable annual access Irish officials get to US policy makers around March 17. A platoon of government ministers are being deployed to engagements around the US.
It’s a well-honed strategy of relying on Irish soft power and the large diaspora in the US.
“The relationship Ireland has with America goes back centuries,” former Irish Prime Minister Leo Varadkar said in an interview. “It’s family connections, it’s cultural, it’s economic, it’s never just about who is in the White House at any particular time.”
Even so, it surely helped that the previous occupant, “Mayo Joe” Biden, was among the most Irish of American presidents, undertaking a four-day homecoming visit in 2023.
Trump is a different prospect. In their meeting, when Martin pointed to the investments made by Irish companies in the US, Trump countered that “the deficit is massive.”
“We want to even that out as nicely as we can,” he said.
Buoyed by pharmaceuticals, Ireland exported €72.6 billion worth of goods to the US last year, up 34% on 2023, according to statistics office estimates. That adds up to a trade surplus in goods of €50.1 billion.
Armed with speaking points and data, ministers have been prepped ahead of their US trips to educate American counterparts about Ireland’s contribution to foreign direct investment in the US.
“We have to gently remind key decision makers in the US that the economic relationship is a real and substantive two-way street now,” said Mike Beary, the former head of Amazon Web Services in Ireland.
Ireland first became an attractive location for international companies as far back as the 1950s, when it dangled tax incentives: The world’s first free trade zone was established near Shannon Airport in 1959. Dell Corp. and Pfizer Inc. were among the early arrivals. Membership of the EU’s forerunner, the EEC, in 1973 allowed tariff-free access to the European market. A corporation tax rate of 12.5% was a further lure for US companies that helped spur the “Celtic Tiger” years of the 2000s. Google Inc., Facebook (now Meta Corp.) and medical devices maker Boston Scientific Corp. followed.
But Ireland’s low-tax regime became a bone of contention with other EU states competing for the same business. In October, Apple was ordered by the EU Commission to pay Ireland €13 billion in back taxes after it ruled that Ireland broke state-aid law by giving the iPhone maker an unfair advantage.
Those advantages have now been closed off and the Irish government was quick to say that the ruling referred to past tax arrangements. Ireland has legislated for the OECD’s 15% minimum corporation tax rate, but still benefits from windfall tax receipts and boasts a rare budget surplus.
Ireland’s good fortune has not gone unnoticed. US Commerce Secretary Howard Lutnick has singled it out for criticism, saying that Ireland runs a budget surplus at the expense of the US.
Ireland’s Central Bank governor, Gabriel Makhlouf, warned in February that downside risks to the Irish economic outlook have increased as its over-exposure to escalating global trade tensions remains high. 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.
There are other areas of potential friction. Given its own fight for independence a century ago, Ireland has historically been supportive of the Palestinian cause, and in May it recognized the state of Palestine. It is also poised to pass a bill that could criminalize trade with Israeli settlements in the Occupied Palestinian territories. Both moves make it an outlier in Europe — and a potential target for Trump. Israel closed its embassy in Dublin in December.
Ireland is additionally in the cross hairs of tensions over tech regulation. US Vice President JD Vance memorably blasted the EU’s data protection regulations, accusing the bloc of censorship of “free speech.” Since the European headquarters of most of the biggest names in tech are in Dublin, it is Ireland’s data protection regulator who takes the lead on cases relating to those companies from across the bloc.
These cross-currents of transatlantic push and pull are set to play out in the Cork area, where big names in pharma and tech including Pfizer, Johnson and Johnson, Apple and Merck & Co. set up in recent decades. Initially attracted by low corporation tax rates and other incentives, they now have large footprints and a pipeline of talent.
Indianapolis-based Eli Lilly chose Kinsale for an $800 million expansion to help ensure a reliable supply of its products. The company also announced a $1 billion expansion of its facility in Limerick. The investment is part of what Lilly officials say is the most ambitious manufacturing expansion ever for the company, driven by the unprecedented demand for tirzepatide, the active ingredient in its injected weight-loss and diabetes medicines.
What Kinsale makes goes to the US for a second step, before being sent to one of two further US facilities for finishing, Eli Lilly Chief Executive Officer Dave Ricks explained in September during a visit to Ireland to announce the expansion.
“Kinsale has had a long, long history of chemical synthesis and lots of well-trained people,” he said. “It was a logical place to put that expansion.”
Eli Lilly has links with schools and colleges in Cork, encouraging more students into STEM subjects. It has a long-established relationship with University College Cork and funds three lectureships, scholarships, PhDs and prizes. The Ports of Indiana and the Port of Cork signed a partnership agreement to explore the feasibility of an express container shipping service.
Eli Lilly has had a presence in Kinsale since 1978, said Marie O’Sullivan, a local politician who also runs a small cafe by the harbor, as she praised its engagement in the community. Given the degree of commitment built up over decades, it’s hard for her to imagine that being unwound.
The company is “leaving money in the area the whole time,” she said. “They are a constant.”
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