Northern Ireland could be caught in the middle of Trump's EU tariff fight
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Post-Brexit arrangements mean Northern Ireland could be acutely impacted by US tariffs. Whether Keir Starmer can sort it out will depend largely on how much Donald Trump cares about the issue.
Due to the complexities of its relationship with the EU, Northern Ireland is at risk of higher tariffs on exports to the US. The government is aware of this: Keir Starmer has said that Northern Ireland will be at the “forefront” of UK decision-making in response to US tariffs.
As part of the UK, goods exported from Northern Ireland to the US should be subject to the 10 per cent “reciprocal” tariff that Trump has announced will be imposed on the UK, due to come into force on 5 April.
However, as a result of Northern Ireland’s unique status vis-à-vis the EU, as set out in the provisions of the Windsor Framework, the US could decide to treat the Northern Irish exports as originating in the EU and therefore subject to a 20 per cent tariff.
There are two key reasons. Firstly, the EU has said that it will impose retaliatory tariffs on the US in the coming weeks. As per the Windsor framework, these EU tariffs would be applied in the first instance to US imports into Northern Ireland.
The EU tariffs can be claimed back via the UK’s duty reimbursement scheme if the importer can demonstrate that the product has remained in Northern Ireland, but this scheme has not yet been tested to the scale that would likely emerge from EU retaliation to Trump’s new tariffs.
Then there is the issue over ‘rules of origin’. The Windsor Framework ensures that the border between Northern Ireland and the Republic of Ireland remains open to allow the free flow of goods and people.
US customs authorities may treat Northern Irish goods as coming from the EU
This creates the possibility that goods produced in the Republic of Ireland, and therefore in the EU, could be moved to Northern Ireland and shipped to the US, with the exporter claiming that the product was of Northern Irish origin and therefore subject to the 10 per cent tariff applied to the UK.
The differential between US tariffs on the UK and EU creates a commercial incentive for exporters to do this – a product subject to a 10 per cent tariff is more attractive to a US buyer than one subject to a 20 per cent tariff.
The combined impact of the above is that US customs authorities may treat Northern Irish goods as coming from the EU.
This could be by accident – US customs authorities will be under significant strain dealing with the fallout of Trump’s reciprocal tariff announcements, and mistakes are highly likely. It could also be deliberate. The US may see a risk of EU tariff circumvention or view Northern Ireland as being part of the EU’s customs area due to its application of EU trade defence tariffs.
A significant question will be the level of credibility that the US places in the UK’s duty reimbursement scheme. Clear evidence that it is working effectively, and that the UK is not levying EU retaliatory tariffs on US exports to Northern Ireland, may minimise the possibility that the US treats Northern Irish goods as from the EU.
How this plays out could have major implications for Northern Irish businesses. Some may directly contact US customs authorities to establish agreements that formally set out the specifications and origin of their products and, therefore, the appropriate tariffs that they are charged.
The extent to which businesses in the Republic of Ireland look to circumvent US tariffs by exporting from Northern Ireland may be limited by Trump’s explicit warning that this would be punished harshly.
In any case, it is likely that the confusion of Trump’s tariff announcements and the complexity of Northern Ireland’s relationship with the EU will create difficulties for businesses and for the UK government.
Starmer and his team will be under pressure to make sure Northern Ireland is not incorrectly treated. But the extent to which he is able to do this will depend significantly on how the US views this issue, and whether Trump gives Starmer any scope to address this.
Sam Lowe and William Howarth work on international trade policy at Flint Global.