How Trump’s tariffs threaten Ireland’s pharma fortune
21:21 Share

Balance your trading strategy by adding futures. CME Group helps you manage risk and capture opportunities in all market environments. Capitalize on around-the-clock access to highly liquid global futures and options markets across all major asset classes. Visit your online broker and get started. See what adding futures can do for you at cmegroup.com slash podcast.

♪♪♪

Earlier this spring, the FT's Ireland correspondent Jude Weber drove from Dublin to the country's Atlantic coast. She went there to visit a town called Westport. This is a really popular tourist destination, so you have a lot of people who come to the town. It has this beautiful scenery. It has a greenway where you can cycle along. There's some great traditional bars. It's, yeah, it's very lively and very lovely, quite lovely. What you're hearing is a bit of music recorded inside one of the local pubs there.

Welcome to Westworth, the mail on the west coast of Ireland.

But Jude wasn't there for sightseeing, because Westport isn't known as only a tourist destination. As you come into town, basically, on the skyline you've got Croke Patrick, which is just like a very pointy mountain. You know, it's like a child might draw a mountain, just like a triangle. And it dominates the skyline. And then as you get closer, you have these big windowless grey factories. It's a big factory complex. And that's where all of the world's Botox is manufactured. Every last bit comes from there.

Botox, the anti-wrinkle drug that's been injected into countless celebrity foreheads. Today, it's made by a major American pharmaceutical company.

And Westport's just one of many Irish towns that have benefited from corporate America's investment over the years. American pharmaceutical companies have a very big and long-standing relationship with Ireland. So in Westport, obviously, you have this company manufacturing Botox. But down in the south, Pfizer have several operations. Eli Lilly have operations in County Cork and also in County Limerick. Johnson & Johnson are in Ireland. There's a lot of very big names, household names.

But with President Donald Trump back in office in the United States, the future of these operations is being thrown into question. Trump's made very clear that Ireland and the pharmaceuticals companies based in Ireland are in his sights.

He's threatened an awful lot. He said that he wants to bring manufacturing back to the U.S., which would obviously impact Ireland very heavily. Ireland was very smart. They took our pharmaceutical companies away from presidents that didn't know what they were doing. He hasn't announced any tariffs yet, but, you know, but it would be very serious if he did. So how much longer will Ireland be a hub for U.S. pharma manufacturing?

And if that changes, what could that mean for a town like Westport? It's a big deal for Ireland. This is a very big worry for Ireland. Ireland's very dependent on investment from multinational American companies, so Ireland really does have a lot to lose in Trump's second term. I'm Michaela Tendera from the Financial Times. Over the past few decades, Ireland's become a hotspot for many American multinational companies. Today on Behind the Money...

We're looking at how that came to be and what happens to Ireland now that President Trump said he wants these companies to come back to the U.S. Ireland's fate as an important manufacturing hub for many U.S. pharma companies begins when the country starts opening up its economy to foreign investment in the 1960s.

Here is Ireland. It's an English-speaking country. It's sort of halfway between the U.S. and Europe. And it was a country that was much less developed, relatively poor. So labor was cheaper. You know, all of these advantages made it an interesting base for a lot of companies. One of those companies sets up shop in the town of Westport in the late 1970s. It's called Allergan.

And it starts with a plant to produce contact lens solution and eye care products, taking advantage of those factors that Jude mentioned, like cheap labor. But Jude, in the late 90s and early aughts, this appeal for American companies to set up in Ireland grows even more.

So why is that? Bolstering Ireland's appeal was the fact that it had very low corporate tax rates. So it cut its tax rate for companies from about 40% to 12.5%. But Ireland also had certain kind of elaborate tax structures. The most notorious one was called the Double Irish. It was a kind of a loophole, which basically allowed companies

to minimize how much tax they needed to pay. There were sort of tax avoidance strategies. Yeah, Ireland was kind of in the same group as some other countries that, you know, maybe you typically think of as like a tax haven. Is that fair to say? Ireland doesn't like to consider itself in that kind of context.

The important thing is that these structures were perfectly legal. They were just loopholes and they were exploited to the full extent by multinationals in Ireland. But they were very controversial and they ended up being abolished. Yeah, but then something else happens when President Trump enters office for the first time in 2017.

And as it turns out, this thing that happens not only increases the appeal for American businesses to be in Ireland, but it really helps out Ireland's government too. What is that? Yes, it's sort of law of unintended consequences, isn't it? So Trump introduced something in 2017 called the Tax Cuts and Jobs Act. And this sort of accidentally turbocharged Ireland's corporation tax profits

Now, typically in this industry, corporation tax is paid where the intellectual property is stored. So the US legislation, this Tax Cuts and Jobs Act and its related provisions, inadvertently provided incentives for pharmaceutical companies to move their intellectual properties into Ireland from tax havens. Trump probably hoped that his initiative would

IP to the US, but a lot of companies moved it to Ireland because they already had big operations there. I see. So that meant that as these companies booked more and more profits in Ireland, one

What happened? Yes, as they booked the profits in Ireland, that just helped Ireland rack up these huge revenues and that's fed into big budget surpluses. So as the profits have gone up and pharmaceutical exports to the US have increased tenfold in the last 10 years. So corporation tax revenues have absolutely skyrocketed. And Ireland's just been raking in all this money, which has given it enormous budget surpluses. Yeah. And what has the surplus done for Ireland?

Well, it's given them a lot of money. So for example, when the COVID-19 pandemic was happening, Ireland had money to pay supports for people. And when the full-scale invasion of Ukraine happened and energy prices went up, Ireland had the money to pay, very handsomely for several years, benefits to people to help with electricity bills and things like that. And now Ireland's been saving money for future infrastructure and pensions in sovereign wealth funds.

So it's given Ireland a lot of extra money. It's really kind of changed Ireland's fortunes. It's suddenly become an exceptionally wealthy country, especially in GDP terms. When Jude traveled to Westport, she met with a local town councillor named Peter Flynn. Peter has essentially lived his whole life in Westport, and he's experienced firsthand the influence of a multinational company like Allergan setting up shop in his town.

I had the chance to talk with him myself a couple weeks ago. Yeah, Peter Flynn is my name. I'm 57 and live in Westport Town Centre, which is just to be clear, I suppose, to your listeners, is on the west coast of Ireland. It's officially Ireland's most beautiful town and best town to live in. Allergan opened its first factory in Westport when Peter was a kid.

And eventually he got a job there himself. Well, if you go back to Ireland in the kind of late 80s and 90s, it was a pretty bleak place. Most of my friends in school at the time would have probably immigrated to the likes of the US or the UK. And I was just lucky enough that at the time I was working in a small audit company in Castlebar, which is a neighboring town. And a role came up within Allergan, working night shift, ironically.

In total, Peter says he worked for Allergan for almost three decades in various roles in operations and finance.

And over that time, he saw how the company shaped and supported the town. It's been crucial to the town and the county over the last 40 plus years. It was set up in 1977, would have started with maybe about 50 employees. Very basic setup in terms of manufacturing was mainly contact lens solution and some basic pharma products. But it has really evolved over the last 40 odd years. And

It is now the only location that we manufacture Botox in the world. So, you know, Westport would have started off as a very basic enough site where labor was relatively cheap back in the 70s and 80s, but has very much evolved over the last two decades in particular to a highly technical operation.

About five years ago, another American pharma company, AbbVie, bought Allergan. And they invested even more money into its facilities in the town. Today, the company employs around 1,500 people in Westport. And I suppose when you put that in the context of a population of 7,500 in the town, you kind of get an understanding how significant it is.

Besides being a big employer, they're very involved in social projects. So they sponsor football teams or local sporting teams, and they've been involved in sort of social initiatives and enterprises. So it's just kind of the fulcrum of the town economically. Westport does have a thriving tourist industry, and it's a great place to be.

But really, you talk to people in Westport and they either have themselves worked for the company or they know someone who has or a family member has. I mean, it's really, it's a really integral part of the town.

Do you want to know and apply the secrets to taking back control of your life? The Rules of Success by Richard Templer offers common sense advice on how to achieve success. From money to time management and relationships to emotions, this comprehensive book guides you with relatable examples and practical advice. Part of the internationally best-selling series Rules, this latest edition is a must-have for personal growth and greater success.

The Rules of Success by Richard Templer, available now at blackworlds.co.uk. So Ireland's benefited on the local level. AbbVie, formerly Allergan in Westport, but also Pfizer, Eli Lilly and Johnson & Johnson scattered around the country. And don't forget, there's also a really large presence from U.S. big tech companies like Apple, Google and Meta. But the country's benefited on a broader national level, too.

Ireland's currently running a budget surplus to the tune of about €9 billion. But relying so much on American companies leaves Ireland with a unique vulnerability.

So Jude, walk me through, what are the risks that come with a situation like this? Well, the risk is that it won't last forever. And Ireland's acutely aware of this because it's sort of materialized quite quickly. And, you know, they know that a big chunk of this money is what the government says is calls windfall in nature. That means it's sort of one or it's temporary and it can't really be explained by domestic growth.

What Jude means here is that this revenue from corporate taxes isn't tied to sales of stuff in Ireland. It's because these huge American companies pay their taxes in the country. In fact, 40% of Ireland's corporation tax comes from just three American companies, not just pharma, but also from the tech sector. If those companies up and leave, that would leave Ireland without a huge chunk of cash.

For some time now, the Irish government has been warning that this exceptional, extraordinary growth that we've been seeing in corporation tax revenue is just unsustainable and there's no way on earth it can continue at the same rate. So simply put, this corporate tax revenue party is going to end eventually. But with Trump in the White House over in the U.S., that party might be ending even sooner than people were thinking.

When the pharmaceutical companies started to go to Ireland, I would have said, "That's okay if you want to go to Ireland. I think it's great. But if you want to sell anything into the United States, I'm going to put a 200% tariff on you, so you're never going to be able to sell anything into the United States." You know what they would have done? They would have stayed here. We don't make our own drugs, our own pharmaceuticals. We don't make our own drugs anymore. The drug companies are in

and they're in lots of other places. So Jude, how likely is it that we see these tariffs put on pharma? Well, we still don't know what Trump's going to do, but the industry is bracing for what it sees as a pretty likely prospect. Now, President Trump flip-flops a lot on policy, but even after you turning on the reciprocal tariffs he launched on his so-called Liberation Day campaign,

The Commerce Department still launched a national security probe into the pharma sector in April, which the industry sees as a pretty strong indicator of his willingness to go through with these levies.

And what exactly could happen if Trump does put tariffs on these companies? So if a company has to pay tariffs, presumably it would pass on the cost of the tariffs to the consumer. But it might ultimately decide that manufacturing some of the drugs or the active ingredients for drugs in Ireland is a losing game and therefore they should move production back to the U.S.,

So they might decide that what they already have in Ireland is fine and good, but new investment they might decide to locate in the US. So that would obviously be affecting a future stream of revenue for Ireland because Ireland obviously wants investment to keep on rolling. And, you know, if there's a threat to that, then there'll be less corporation tax revenue down the line and therefore less money flowing into government coffers.

Got it. And are there any other concerns about things that the Trump administration could do beyond just potential tariffs? Yeah. Perhaps a bigger risk is that if Trump decided to do anything to specifically lure the IP back, the intellectual property back into the United States, that then Ireland would become less of an attractive location for

for companies in general. So we just don't know really, but I think all the risks are there for Ireland and they're very clear that probably something will happen. There might be a baseline level of tariffs or there might be less investment in the future or corporation tax in the US might be lower and therefore might be more competitive with Ireland, which would make perhaps Ireland less attractive as a place to set up shop for companies or to locate big investments.

So we're still in a holding pattern. But if Trump does slap tariffs on pharmaceuticals, it could hit a town like Westport pretty hard.

I asked Peter Flynn about how people in Westport are feeling. So I don't think there's any great fear right now. I suppose our fear is more about the future and what the future decisions will be made in terms of investment for Westport, you know, five, 10 years, 15 years down the road. The other aspect, I suppose, of tariffs is the uncertainty that that brings. And I suppose that's where I

really would have to worry. If you're in any business, the last thing you need is uncertainty. You need to know what's going to happen in the future. And I think the difficulty with President Trump right now is you don't know from week to week what the decision is going to be. And that's the piece that I would worry about from an Irish perspective right across the board is that, you know, multinational headquarters will say, hold on a second, where do we now locate our manufacturing sites and our key products in the future?

Peter mentioned these kinds of things when I talked to him in Westport and other business leaders. They were very keen to stress that, no, you know, there's not, you know, people panicking all over the place. And they're keen, I think, to put a very positive spin on Westport. But I spoke to a local pharmacist.

who he sort of admitted, yes, there is concern. So the main concern isn't really the day-to-day today. People don't expect to be out of a job tomorrow, regardless of what happens. But it really is all to do with how resilient the industry is in Ireland in the future, whether or not

American companies that have been so important to Ireland, pharmaceutical companies that have been so important to Ireland's economy and to providing jobs and the social fabric, whether they will continue to come. There's a bit of a silver lining for a town like Westport in the face of potential changes from Trump. Jude tells me that these giant factories, like the one that makes Botox, can't just, you know, disappear overnight. One thing people aren't worried about is

either in Westport or anywhere else, is them just picking up the factory and taking it back to the US because they can't do that. It would take too long and a pharmaceutical facility has to be authorised by the FDA and that just takes a long time. So there's just no, it's not like they can just flick a switch and, you know, turn off Ireland and turn on someplace in the US. I mean, I'll give you an example. We built our Botox site over 20 years ago in Westport and

Obviously with demand growing, we had to build a second site. It took probably close to eight to nine years to build that second manufacturing site.

because of the complexity of trying to replicate the production process. So it really is not a simple process just to simply pick up your operations, move it overseas and start all over again. It really isn't. And I think that's what your president, President Trump, is looking for, is that multinationals would quite literally pick their operations up around the world and move them over to the US. That just is not possible anymore.

While Westport braces for what it could look like a decade into the future, Ireland on the whole is preparing for the worst. I asked Jude what Ireland's government is doing to navigate this. Well, what they're doing is they're taking some of this exceptional windfall, this money that's dropped out of the sky into their bank accounts, and they're putting it into two sovereign wealth funds to save money for rainy days.

And what they want to do that is to make sure that they have money for pensions in future and also for infrastructure. So they want to stash money away for future rainy day problems. And that comes under, if you like, the heading things that we can control because government ministers, they're always talking about, you know, we can't control what Donald Trump will do. We don't know what he's going to do. Maybe even he doesn't know what he's going to do.

So the other thing, and this also comes into the what we can control category, is to further diversify the economy. Ireland's just launched a new semiconductor strategy to try to boost its semiconductor industry.

already has a lot of investment in tech, in semiconductors, in agri-food, all of these things. And it wants to keep on attracting foreign investment, even if not necessarily in the same sectors as before. So, Jude, what is your prediction? Will Trump's threats lure American pharmaceutical companies away from Ireland for good?

Not for good, no, because the pharmaceutical companies that are based in Ireland also serve the EU market from Ireland. And that means that they will need a base in the EU. And Ireland's perfectly positioned for that. Plus, they've sunk billions and billions and billions of dollars into Ireland. So I don't think they want to up sticks and abandon that investment position.

But there might be some reordering. And I think most of the worry is concerned with future developments. Will investment continue to flow? Will this continue to be such a such a big source of employment and source of sort of specialization for the Irish economy? I also asked Peter Flynn if he could make an appeal to President Trump from his small town of Westport, what would it be?

This is what he told me. I would say, please make decisions that you stick to. Please make decisions that make sense, not just for Irish people, but for your own people in terms of how we operate. Because there is nothing as bad in the world of business as uncertainty. And right now, we're in a world of a hell of a lot of uncertainty. And that just isn't good for any country. Behind the Money is hosted by me, Michaela Tindera.

This episode was produced by me and Safiya Ahmed. Special thanks to Hannah Kuchler. Sound design and mixing by Sam Giovinko. Original music is by Hannes Brown. Topher Forges is our acting co-head of audio. Thanks for listening. See you next week.

Managing stress, anxiety and insecurity in today's world is no small task. In The Mindfulness Habit by Lisa Wren, you'll follow a unique mindfulness coaching program that will lead you to a calmer, healthier and more intentional life. Confront unhealthy assumptions and transform your decision making both personally and professionally.

This guided program includes online content and audio exercises for an even more in-depth journey. The Mindfulness Habit by Lisa Wren, available now at blackwells.co.uk. Did you know that foreign investors are quietly funding lawsuits in American courts through a practice called third-party litigation funding? Shadowy overseas funders are paying to sue American companies in our courts, and they don't pay a dime in U.S. taxes if there is an award or settlement.

They profit tax-free from our legal system, while U.S. companies are tied up in court and American families pay the price, to the tune of $5,000 a year. But there is a solution. A new proposal before Congress would close this loophole and ensure these foreign investors pay taxes, just like the actual plaintiffs have to.

It's a common sense move that discourages frivolous and abusive lawsuits and redirects resources back into American jobs, innovation, and growth. Only President Trump and congressional Republicans can deliver this win for America and hold these foreign investors accountable. Contact your lawmakers today and demand they take a stand to end foreign-funded litigation abuse.