The Sectoral Impacts of Tariffs and Trade Fragmentation in the Irish Economy

Elizaveta Lukmanova and Michael O'Grady
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Elizaveta Lukmanova: Central Bank of Ireland
Michael O'Grady: Central Bank of Ireland

No 2/SI/25, Central Bank Staff Insights from Central Bank of Ireland

Abstract: Ireland’s high-value export sectors are deeply embedded in global value chains, relying heavily on intermediates sourced from abroad to produce export content, leaving them highly exposed to tariffs. Using a multi-country, multi-sector model of the world economy with input-output linkages, these sectors are identified as the main drivers of the Irish economic response to import tariffs imposed under the recent US-EU trade deal. The moderate aggregate impact — a 0.6 per cent decline in real GDP — masks significant variation across sectors. Pharmaceuticals, most directly reliant on US demand, drives the decline in Irish output. Highlighting the concentration of economic activity in the pharmaceutical sector, we also show that a tariff regime targeting this sector specifically with additional US tariffs could more than double the overall output losses relative to the trade deal scenario.

Date: 2025-09
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