Roula Khalaf, the Editor of the Financial Times, has curated a selection of standout stories in her weekly newsletter. This week, she highlights a striking contrast in the town of Westport, located on Irelands picturesque Atlantic coast. At the forefront is the majestic peak of Croagh Patrick, a site that draws numerous visitors for its stunning views and hiking opportunities. However, overshadowing this natural beauty are the stark, windowless grey factory units that contribute significantly to the local economy by manufacturing Botox, the worlds most popular cosmetic treatment, for AbbVie, a prominent U.S. pharmaceutical company. Complicating matters, former President Donald Trump has expressed a desire to bring pharmaceutical production back to the United States, putting Westport's economy at risk.

This week, Trump intensified his critique of American companies operating in Ireland, making it clear that he believes U.S. businesses should repatriate their production facilities. His recent threats to impose tariffs aimed at incentivizing investors to reshore their operations have raised concerns among the towns 7,000 residents. Notably, approximately 1,500 of these individuals are employed by AbbVie, where their work revolves around the production of Botox, a drug that is both popular for its cosmetic applications and vital for various medical treatments.

People are holding their breath, remarked Geraldine Horkan, the Chief Executive of the Westport Chamber of Commerce. Horkan, who has firsthand experience in the pharmaceutical sector from her tenure at Allergan before its acquisition by AbbVie in 2020, likened the current situation to an airplane circling in a holding pattern, poised for an uncertain landing.

Over the years, Ireland has cultivated a reputation as a major hub for U.S.-based pharmaceutical companies, including giants like Pfizer, Eli Lilly, and Johnson & Johnson. In addition to Botox, which is processed in Westport to be shipped as vials of powdered substance designed for mixing with saline solution, Irish factories are responsible for producing active ingredients for a wide range of medications, including Viagra, the weight-loss drug Mounjaro, and statins used for lowering cholesterol levels.

Amidst the uncertainty stirred by Trumps tariff threats, Ireland has been eager to ramp up its pharmaceutical exports to the U.S. Before any potential tariff imposition, a striking 91 percent of Ireland's goods exports to the U.S. in February were comprised of chemicals and related products, inclusive of medical and pharmaceutical goods. In fact, during the initial two months of the year, Irish pharmaceutical exports to the United States reached nearly 20 billion, a substantial number compared to the 44 billion worth exported throughout the entire previous year, according to official trade statistics.

Although Trump enacted global tariffs, which he recently froze at a baseline rate of 10 percent while pursuing trade negotiations with the European Union and other nations, pharmaceutical goods have so far escaped these tariffs. Simon Harris, Irelands Foreign and Trade Minister, has publicly stated that it would be inappropriate and bizarre for the U.S. to impose tariffs during ongoing trade discussions. However, the outlook for a continued tariff-free environment seems increasingly grim.

The U.S. Department of Commerce has initiated a Section 232 investigation into the pharmaceutical sector, a move that could grant the president the authority to impose restrictions on imports that are perceived as a threat to national security. According to U.S. Commerce Secretary Howard Lutnick, this could potentially lead to the introduction of tariffs within the next month or two.

Trump, during a meeting with Taoiseach Michel Martin of Ireland last month, lamented that Ireland has a firm grip on the U.S. pharmaceutical industry, stating, We dont make our own drugs, our own pharmaceuticals anymore. The drug companies are in Ireland and theyre in lots of other places China.

Allergan, which has had a presence in Westport since it opened a facility in 1977 for the production of contact lens solutions and eye care products, now sees Botox as its primary revenue generator. According to AbbVies most recent filings from 2023, approximately 70 percent of the production from their Westport facility is destined for the U.S. market.

While Botox remains a strong leader in the cosmetic industry, it faces competition from chemically similar products such as Dysport, produced by France's Ipsen, and Xeomin from Germanys Merz. Despite this competition, AbbVie is confident in its ability to retain its market dominance. In the past year, Botox for aesthetic purposes brought in $2.72 billion in net revenues, while therapeutic applications of Botox generated an impressive $3.3 billion. Should tariffs be imposed, the prices of these drugs would rise, potentially putting them out of reach for many consumers, especially since cosmetic procedures are typically not covered by U.S. health insurance.

Philip Heaney, a local pharmacist, voiced his concerns, stating, Were all extremely worried. He highlighted the precarious situation of Westports economy, noting the deep ties the town has with the pharmaceutical industry. Peter Flynn, a local councilor and former director of tax and finance at Allergan, added to the discourse by emphasizing that production cannot be relocated overnight. He criticized Trumps remarks as lacking consideration for the broader implications on local economies.

Ireland stands as the third-largest exporter of pharmaceuticals globally, housing 90 production facilities that cater not only to the U.S. but also to the EU and other international markets. Over the last decade, more than 10 billion has been invested in the pharmaceutical sector. Other countries with notable pharmaceutical industries, such as Denmark, Switzerland, and Singapore, are now also under scrutiny from Trump.

In light of the potential tariff threats, many pharmaceutical companies have begun signaling significant investments in the U.S. market. For instance, Johnson & Johnson has committed to a staggering $55 billion over the next four years, Eli Lilly aims to invest $27 billion, and Novartis recently announced a $23 billion investment in manufacturing and research and development.

Concerns have been raised at the highest levels of European governance as pharmaceutical executives have reached out to European Commission President Ursula von der Leyen. They warned that Europe might face a loss of 100 billion in investment and R&D spending over the next five years if U.S. tariffs and proposed EU reforms regarding intellectual property protections continue to render Europe less enticing for pharmaceutical investments.

Adrian Noonan, the owner of Knockranny House Hotel, expressed the gravity of the situation, stating, It would be a massive loss if the pharmaceutical companies were to abandon Westport. The hotel, which holds the distinction of being the towns first four-star establishment, has been a crucial hub for business, hosting visiting executives and board meetings, all of which contribute to the local economy.

It is essential to recognize that establishing new pharmaceutical plants requires extensive regulatory approvals, which could delay any expedited relocation of production back to the U.S. Consequently, analysts speculate that corporate leaders may begin to reconsider future investments in Ireland altogether should tariff threats materialize.

The sentiments echoed by local residents underscore a collective anxiety about the possibility of losing the pharmaceutical industrys presence in Westport. Were all extremely worried, reiterated pharmacist Philip Heaney, encapsulating the fears of many in this small town, who feel deeply connected to the pharmaceutical industry. He humorously likened their relationship with the industry to discussions surrounding Canada being the 51st U.S. state, emphasizing just how integral pharmaceuticals have become to their local identity.