Vanishing Act: Strip Out Pharma and Ireland, and Over 40% of the EU’s U.S. Trade Surplus Disappears

The transatlantic trade relationship is often framed in terms of a stark imbalance: in 2024, the European Union ran a €198.2 billion goods trade surplus with the United States. On the surface, this appears to confirm the familiar narrative of American overconsumption and European export dominance.

But remove one small country and one high-margin sector, and the picture looks radically different.

Exclude Ireland and pharmaceutical trade, and over 42% of the EU’s goods surplus disappears. The total drops from €198.2 billion to €114.3 billion. This isn’t a story of traditional European manufacturing strength. It’s a story about tax structuring, profit shifting and intellectual property.

Pharma and the Green Jersey

Ireland accounted for €50.1 billion of the EU’s trade surplus with the U.S. in 2024, driven by €72.6 billion in exports, much of it pharmaceuticals. These exports are rarely “Irish” in substance. They are booked through Ireland by U.S. drug giants like Pfizer, AbbVie, Merck, and Johnson & Johnson – American firms that have shifted intellectual property and production into Ireland to benefit from its tax and accounting regime.

According to Eurostat, total EU pharmaceutical exports to the U.S. reached €119.8 billion in 2024. Ireland alone accounted for €44.4 billion of that, according to monthly CSO Ireland PxStat data. Remove just Irish pharma, and the surplus drops to €148.1 billion. Remove all pharma exports across the EU, and only €124.3 billion remains. Strip out both Ireland and EU-wide pharma trade – without double-counting – and you’re left with a €114.3 billion surplus.

That’s a €84 billion difference – and a reminder that this is not trade in the traditional sense.

A Surplus of Paper, Not Production

This is not a classic trade imbalance. It’s a function of U.S. multinationals exporting to the U.S. from their own IP-holding companies in Ireland. The goods may be booked as EU exports, but the economic value flows back to the U.S. parent – bypassing U.S. tax authorities and inflating the transatlantic deficit in the process.

This aligns with research by Brad Setser, who has long argued that the U.S. trade deficit with Ireland – and the EU more broadly – is distorted by IP-based profit shifting, especially in pharmaceuticals. The trade flows look European. The profits are American. The taxes disappear.

Tariffs and Tax Loopholes

Donald Trump is threatening to impose 50% tariffs on EU goods unless Europe buys more from America. But the numbers tell a different story. The so-called “EU trade surplus” is, in large part, a U.S. policy failure – a product of American multinationals using Ireland as a booking centre for global revenues.

The hard truth for Dublin/Brussels: If Washington wants to shrink the trade deficit, the solution isn’t tariffs. It’s closing the loopholes that allow American companies to sell to American consumers through Irish booking centres.

Methodological Note

All figures are sourced from the most recent public releases:

• Total EU–U.S. goods trade balance: €198.2 billion
  → Eurostat: EU trade in goods with the USA (March 2025)
• EU pharmaceutical exports to the U.S.: €119.8 billion
  → Eurostat: Extra-EU exports of pharmaceutical products by partner country (April 2025)
• Ireland’s goods trade surplus with the U.S.: €50.1 billion
  → CSO Ireland: Goods Exports and Imports December 2024 (published Feb 2025)
• Ireland’s pharmaceutical exports to the U.S.: €44.4 billion
  → CSO PxStat: Monthly trade in Medicinal & Pharmaceutical Products to USA

The €114.3 billion residual trade surplus is derived by removing:

1. The full value of Ireland’s trade with the U.S. (€72.6B exports, €22.5B imports),
2. All EU pharmaceutical exports to the U.S. (€119.8B), net of imports (€45.85B),
3. Avoiding double-counting of Irish pharmaceutical exports included in both categories.