The surge in weight loss drug imports drives up the trade deficit with the U.S., with the small country of Ireland unexpectedly becoming America's second-largest trading partner

The surge in demand for weight loss drugs and concerns over tariffs have propelled Ireland to become the second-largest source of the U.S. trade deficit in goods.

On Friday, media reports indicated that in the first four months of this year, the U.S. imported $36 billion worth of hormone-based drug ingredients from Ireland, primarily used in the production of popular obesity and diabetes medications. This figure is more than double the total amount imported from Ireland last year, pushing this country of only 5.4 million people to the second position on the U.S. trade deficit list.

Nearly 100% of these imported goods are destined for Indiana, where the headquarters of Eli Lilly, the manufacturer of weight loss drugs Zepbound and Mounjaro, is located in Indianapolis. U.S. Customs records show that these drug ingredients account for about half of the $71 billion worth of goods imported from Ireland in the first four months.

Despite the worsening trade deficit, these drugs are changing the landscape of the healthcare industry, with Novo Nordisk becoming the highest-valued company in Europe. Meanwhile, the company is investing billions of dollars to build factories in the U.S., which may alleviate trade imbalances in the long term.

Tariff Concerns Trigger Stockpiling

Trump's repeated trade wars have rewritten the global trade landscape this year, at least temporarily widening some trade imbalances he sought to eliminate.

Companies are rushing to ship goods to the U.S. before tariff deadlines, with the first round of stockpiling occurring before the tariff announcement on April 2, followed by smaller-scale rush shipments after the White House suspended some tariffs.

Ireland is at the center of the global rush to stockpile. The country is a major hub for U.S. pharmaceutical giants, which have expanded their operations there partly due to Ireland's favorable tax policies. Some of the world's best-selling drugs, such as AbbVie's wrinkle treatment Botox and Merck's cancer treatment Keytruda, are produced in Ireland.

Matt Moran, former director of the Irish biopharmaceutical industry organization and consultant, stated:

It makes sense. The current situation is uncertain, so stockpiling provides some security. There is currently huge demand for these products.

The trade imbalance has put Ireland in an awkward position, as it was placed on the U.S. Treasury's currency manipulation monitoring list earlier this month. The Central Bank of Ireland reported on Thursday that newly established factories for weight loss drug ingredients have helped drive the country's export growth, with the economy growing nearly 10% in the first quarter.

Supply Chain Challenges in the Weight Loss Drug Market

Eli Lilly holds a significant position in the weight loss drug market, with Bank of America analysts predicting that sales of its GLP-1 drugs Mounjaro and Zepbound are expected to nearly double this year, reaching about $30 billion.

Maintaining the supply of weight loss drugs is a challenge for both Eli Lilly and its competitor Novo Nordisk, the manufacturer of Ozempic and Wegovy. Both companies initially struggled to meet the demand for these drugs. Eli Lilly resolved the shortages more quickly, helping it capture market share from Novo Nordisk.

Additionally, there has been a surge in demand for air logistics, with transportation and logistics companies noting an increase in demand for drug shipments, which are typically transported by air rather than the cheaper sea freight due to their lightweight and high value According to data company WorldACD, the volume of pharmaceutical shipments from Ireland to the United States more than doubled in March and April. Swiss logistics company Kuehne + Nagel, which operates in the country, stated that its team is working overtime to meet the increased booking requests and customs documentation work