By Paul Hannon

Ireland's economy surged in the three months through March as U.S. pharmaceutical giants based in the country boosted production to build stockpiles back home ahead of threatened tariffs.

Ireland's strong start to the year, alongside a pickup in Belgium, supported eurozone growth as 2025 got underway, with figures for the currency area to be released Wednesday. Spain, which also released figures Tuesday, recorded a slight slowdown, while continuing to grow at a robust pace.

However, high levels of production to build reserves of drugs in the U.S. suggest activity may slow as the year advances and the need to add to stocks diminishes, while the higher tariffs that took effect this month will hit Ireland and other parts of Europe.

"This was driven by an increase in the multinational dominated sectors, with a more modest increase in the domestic sectors," said Enda Behan, a statistician at the Central Statistics Office.

Ireland's statistics agency said gross domestic product was 3.2% higher in the three months through March than in the last quarter of 2024. By comparison, Spain's economy grew by 0.6%, while Belgium's economy grew by 0.4%.

Although the country only accounts for 3.5% of total output in the eurozone, an increase of that size in its GDP may have boosted growth in the currency area. Before the release of the Irish data, economists had expected figures due Wednesday to show the eurozone economy grew by 0.2% in the first quarter.

President Trump has increased tariffs on imports of automobiles, steel and aluminum from the European Union, but suspended a further increase in duties on a broad range of goods announced April 2 for 90 days.

However, he has repeatedly threatened to take action on pharmaceuticals, with many of the drugs consumed in the U.S. made outside the country, especially in Ireland. The Trump administration has launched an investigation under Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs on goods deemed essential for national security.

Higher tariffs would make pharmaceuticals more expensive for U.S. importers. Since many drugs can be stored for a period of time, it makes sense for U.S. buyers to build stocks ahead of possible tariffs as a way of keeping costs, and prices for patients, down.

Ireland's statistics office didn't provide a breakdown of the sources of demand for the economy's output in the first quarter. But an earlier release of trade figures for Feb. showed exports of pharmaceuticals were 146% higher than a year earlier, while total exports to the U.S. were up by 210%.

Some of that increase reflects a surge in demand for weight-loss medications, but front-running of other drugs was also a factor.

Merck & Co. manufactures large amounts of its cancer drug Keytruda at a plant to the north of Dublin that came on stream in 2021.

It is the world's top-selling pharmaceutical, and last year made up roughly half the company's revenue. Speaking about the prospect of tariffs, Merck Chief Executive Rob Davis last week told analysts that the company already has enough supply in the U.S. for this year and is working on expanding manufacturing in the U.S. for future years.

While the eurozone economy likely continued to grow at the start of the year, the outlook has darkened since Trump raised tariffs.

A monthly survey released Tuesday by the European Commission found that businesses and consumers were significantly more downbeat about their prospects in April than in March.

The Economic Sentiment Indicator fell to 93.6 from 95.0, its lowest level since December and well below the long-term average of 100. That suggests businesses are likely to hold back on new investment, and households on major expenditures.

"Unless there are major changes in U.S. trade policy, sentiment as well as economic activity in the eurozone will remain subdued over the coming months," wrote Carsten Brzeski, an economist at ING Bank, in a note to clients.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

April 29, 2025 06:37 ET (10:37 GMT)

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