ALL THINGS CONSIDERED, Micheál Martin’s visit to the White House could have gone a lot worse. 

Shamrock socks were worn, jokes were made – boxing, Ireland’s housing crisis. All the normal, safe topics.

The one time when things seemed to take a bit of a turn was when Donald Trump brought up the supposed US trade deficit with Ireland.

‘We have a massive deficit with Ireland. Because Ireland was very smart. They took our pharmaceutical companies… they made it very good for companies to move over there,” he said.

Martin was forced to push back, arguing that it’s a ‘two-way street’ between the countries and highlighting US investments by the likes of Ryanair and AerCap.

But what is a trade deficit, and why does Trump care about it so much?

Imbalance

A trade deficit is when there’s an imbalance in trade between two countries – where one is importing more than it exports.

So if Ireland sells (meaning exports) €100 billion of goods to the US, but the US only exports €90 billion to Ireland, there’s a trade deficit of €10 billion in Ireland’s favour.

Unless trade is perfectly balanced between two countries, which basically doesn’t happen, there will always be something of a deficit on one side.

What Trump seems to be annoyed about is the supposed size of the US trade deficit with Ireland.

He has implied that the reason for a big trade deficit between Ireland and the US is because so many US businesses have moved their production to Ireland.

Basically, Ireland is doing very well from US companies, whereas the US doesn’t get much from Irish firms.

So, are Trump’s claims correct?

Deficit

Well, kind of. Exports cover two main areas – goods and services.

When it comes to goods, there is a big deficit in Ireland’s favour.

US figures show that the US had a trade deficit in goods with Ireland of $87 billion (€80 billion) in 2024.

Figures from Ireland’s Central Statistics Office actually put this slightly higher, estimating a goods deficit of €93 billion for the year. This was up €18 billion compared to 2023.

The deficit likely mostly relates to pharmaceutical companies, as many US pharma firms have their production based in Ireland and then ship products back to the US.

Services

But then there’s the other side of the coin – services.

Here, it’s estimated there’s a €163 billion billion deficit in the US’s favour.

The picture here gets a bit skewed by multinational activities. Many of the services counted in this number are likely the Irish subsidiaries of US multinationals making payments to their parent companies.

This is because many big US firms have their intellectual property located in Ireland. This has traditionally been done to enable profit-shifting, which we looked at in more detail here.

This means talk of a trade deficit is more complicated than the goods figures would suggest. The CSO estimated that in the final three months of 2024, Ireland had a €54 billion deficit with the US when both goods and services were counted.

But – basically, Trump does not seem to notice or care about the services deficit in the US’s favour, and has repeatedly highlighted the goods deficit instead.

Why does Trump care anyway? 

When it comes down to it – Trump’s whole shtick is American jobs, for Americans.

He wants to put as much pressure as possible on US companies to make their products in the US.

Trump likely isn’t poring over CSO data and checking how the Ireland-US goods deficit lines up with the service deficit.

He invokes the ‘trade deficit’ with Ireland so often as a way of putting pressure on companies to have more of their production in the US. This is also why he made his comments about Ireland ‘taking’ US pharma companies.

The real question is what concrete action will follow his words.

As outlined, a decent chunk of the US-Ireland trade deficit – when it comes to services – is likely due to multinational jiggery pokery.

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This is something which is largely attributed to the US tax system – not the Irish one – as it has a unique way of allowing US companies to book their overseas profits.

But there is also the real consideration of a big chunk of American companies producing goods here and selling them back to the US.

Changing some of the US rules on taxation could go some way towards making US companies operating in Ireland change their way of doing business. Produce more in the US, and less in Ireland.

But that is a change to the US’s own rules. And that would likely affect services more than goods.

If Trump wants American companies located in Ireland to produce more goods in the US, he’s more likely to turn to tariffs.

These would come in the form of the tariffs he’s threatened to impose on the EU. Even yesterday, he threatened to impose 200% tariffs on wine, champagne and other alcoholic products from European Union countries. 

The two leaders in Washington on Wednesday. Alamy Alamy

By extension, this would make it more expensive for American companies in Ireland to sell their goods back to the US.

Trump would hope, by making it more expensive to sell goods from Ireland, American companies would instead choose to produce more goods in the US. This is a particular concern for the huge number of US pharma firms here.

So when Trump raises the US-Ireland trade deficit, he doesn’t care too much about the specific number. It’s more what it represents in his eyes.

Which is US companies being lured to the EU, which then benefits from these American businesses. While the US supposedly doesn’t benefit as much from EU businesses.

This is why Martin was eager to highlight the likes of Ryanair and AerCap. To show that the US does benefit from Irish businesses.

But in this context, Trump seems more interested in raising Ireland’s ‘trade deficit’ as an example of an EU country ‘taking advantage of’ the US.

This in turn is meant to put more pressure on the EU, and justify Trump’s move to impose tariffs on the bloc.

The issue here is broader than Ireland and the US – it’s the US and the EU.

Ireland will just have to hope it doesn’t get caught too badly in the crossfire.