Northern Ireland Sizes Up Exposure to Trump Trade War With EU

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(Bloomberg) — Donald Trump’s trade war is threatening to open fresh Brexit wounds in Northern Ireland.

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The UK escaped the US president’s opening salvos over the weekend as he imposed fresh tariffs on China, announced measures against Mexico and Canada that he later delayed, and threatened the European Union. But there are growing concerns in Northern Ireland that the region could get caught up in a tit-for-tat fight if he slaps tariffs on the EU.

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As the risk of a trade war intensifies — Trump has described the US commercial relationship with the bloc as an “atrocity” — business figures and unionist lawmakers told Bloomberg they are increasingly worried about the impact any EU retaliations could have on goods entering Northern Ireland. They asked not to be named discussing a commercially and politically sensitive topic.

At the root of the dilemma is Northern Ireland’s status in Britain’s post-Brexit relationship with the EU. As part of the so-called Windsor Framework, the region remains a de-facto part of the bloc’s customs union due to its border with the Republic of Ireland. 

But it was also guaranteed equal treatment within the UK internal market — an arrangement that at the time was presented as being the “best of both worlds,” with access to both the EU and UK markets. It was a key demand from British unionists in Northern Ireland, who felt unfairly distanced from Britain. 

The principal worry is that if the EU imposes tariffs on US goods entering the bloc, a duty on imports into Northern Ireland may need to be paid, according to the people. The rest of the UK would not be impacted, leaving Northern Ireland at a competitive disadvantage and risking upheaval in the already-fragile region. 

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There is less concern about some £1.5 billion ($1.9 billion) of Northern Irish goods exports destined annually for the US, because they could be sent via Great Britain to avoid the duty, the people said. That’s not possible for US imports, they added, due to checks on goods entering Northern Ireland from Britain that are enshrined in the post-Brexit settlement. 

A different set of tariff rules for Northern Ireland would come at a delicate moment for Prime Minister Keir Starmer, who’s personally invested in resetting relations with the EU after years of turbulence that followed Britain’s referendum vote in 2016 to leave the bloc. 

The prime minister presented a more confident case for closer UK-EU ties this week, having shown reticence on the issue in his first six months in office. He was the first British prime minister to have dinner with EU leaders since Brexit on Monday, urging them to accelerate talks for a security pact spanning collaboration on military technology and joint expeditions.

“Trump’s attitude puts a brake on that because Starmer is not going to want to fully align with the EU that is subject to a trade war with the US,” said Jonathan Tonge, British and Irish politics professor at the University of Liverpool. In trading terms, Northern Ireland “is closer to the EU in many ways than it is to the rest of the UK,” a situation that’s “toxic” for the region’s unionists, he said.

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Trump this week said the US would “absolutely” impose tariffs on the EU and that he’d be doing something “very substantial.” Any impact on Northern Ireland will likely depend on whether he targets EU member states — a move that wouldn’t capture the region — or the EU customs union as a whole. 

“If he imposes tariffs on just EU members, that would give Northern Ireland a huge advantage because companies in Ireland are likely to move at least some production there,” said David Henig, director of the UK Trade Policy Project. “If they’re imposed on the customs union, Northern Ireland would be at a disadvantage compared to the rest of the UK.”

If a trade war does escalate, importers in Northern Ireland could, nevertheless, have recourse to the tariff reimbursement clause built into the Windsor Framework. It means any tariffs applied to goods entering the region could be reimbursed, so long as it can be proved the product didn’t leave the UK internal market. 

Even so, that would represent an extra bureaucratic hurdle, as would any need for the region’s exporters to ship goods to the US via Great Britain in order to circumvent American tariffs. That highlights the divergence between the treatment of exporters and importers in Britain and Northern Ireland after Brexit. 

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Years of painful negotiations between London and Brussels largely centered around the contentious Irish Sea border that angered many unionists. It prompted the Democratic Unionist Party to collapse Northern Ireland’s power-sharing government in 2022, leaving the region in stasis for two years. The potential fallout from a looming trade war is a reminder to Westminster that those issues have not been put to bed yet.

“There’s potential for a big political divide there,” Tonge said. “On the nationalist side of the fence, very pro-EU, and — within unionism — visceral hostility to the EU and Northern Ireland’s unique bespoke place” almost as part of the EU. 

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