As a fractious winter election reaches its denouement, it is hardly an ideal time for Ireland to enjoy a Wall Street Journal splash portraying the country revelling in wealth achieved through corporate tax dividends from US companies.
The article is the latest indication that Ireland’s annual corporate tax bonanza – expected to total €37.5 billion this year – may require more than the offering of a shamrock bowl at the next St Patrick’s Day meeting at the White House to persuade the incoming Trump administration that things should stay the same.
Last week, US president-elect Donald Trump issued a social media post vowing sweeping tariffs of 25 per cent on all tariffs on products from Mexico and Canada and a separate tariff for China – a presage of intent.
A recent post on X by Howard Lutnick, the billionaire chief executive of Cantor Fitzgerald and Trump’s pick for commerce secretary, caused a wave of anxiety across Ireland.
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“It’s nonsense that Ireland of all places runs a trade surplus at our expense,” Lutnick griped in the post. “We don’t make anything anymore. Even great American cars are made in Mexico. When we end this nonsense America will be a truly great country again. You’ll be shocked.”
[ Ireland’s corporate tax boom makes the front page of the Wall Street JournalOpens in new window ]
The implied threat was enough to provoke a fresh wave of concerned reflection on the sustainability of Ireland’s reliance on foreign direct investment.
The sudden elevation to news prominence of Lutnick, who also headed up Trump’s transition team, signals the election-promise “from day one” hurriedness which will mark Trump’s second term.
Trump’s first administration was characterised by a chaotic appointments procedure. This time, he has selected a radical cabinet to push through campaign promises including the imposition of tariffs on imports, the mass deportation of undocumented migrants, a stark shift on foreign policy with profound implications for the citizens of Ukraine and Gaza and a vow to start making stuff in America again.
It may be a little self-serving for Irish voices to be squawking about the potential threat to the corporate tax take. But the worry is real, with three major US companies contributing 43 per cent of Ireland’s corporation tax take in 2022 and an estimated 15 per cent of the Irish labour force working for just under 1,000 US companies.
[ How could the EU respond if Trump imposes tariffs?Opens in new window ]
Last May, Trump was ambivalent when asked, after arriving at his hotel in Doonbeg, Co Clare, whether he believed US companies located in Ireland should pay more tax to their parent state.
“That’s an interesting question,” he said. “I won’t answer that question in your country, but a lot of people would say yes. But Ireland has done a great job, you’ve lured a lot of companies in. And they love it here, they really love it here, they’ve been treated well just like I’ve been treated well. This has been a great success.”
It was a classic Trump response in that it could mean anything – or nothing at all. Right now, as the emergent administration faces the task of having some of its more controversial appointments confirmed, what will happen over the next four years is anyone’s guess. But there is a chance that Ireland’s alarm is, at the very least, a bit previous.
“Ireland isn’t even close to being on these guys’ hit list,” reckons Mark Blyth, William Rhodes professor of International Economics at Brown University’s Watson Institute for International and Public Affairs.
He says he is aware of the recent observation by Lutnick and is sceptical of its intent.
“Either that guy literally is dumb as a box of hammers and doesn’t understand that a small country like Ireland couldn’t possibly run a trade surplus against the United States – unless it was making the milk of the leprechauns for youth and eternal life – what could it be possibly be making that would run a trade surplus? It has to be financial stuff going through other companies,” he says. “And if he understands that, the warning shot is not at Ireland. It is at those companies.”
[ US trade partners warn Trump tariffs would harm all involvedOpens in new window ]
He contrasts the US with the situation in China, where “you have a closed capital account, an authoritarian government, massive surveillance, and can take people from corporate boards and make them disappear. You can discipline your capitalists. You can tell them to do stuff and they will say yes”.
Blyth notes that in the final days of his last administration, Trump issued an executive order that all American companies leave China and come home. “Nobody paid any attention whatsoever,” he says.
“They would have to move heaven and earth to change the federal government beyond all recognition, develop the type of authoritarian state capacities found in China and force American corporations into doing exactly what the government wants. And then, you could maybe come for Ireland.”
Total US imports from Ireland fell just short of $87 billion in 2023, small beer in its total imports value of $3.3 trillion. Some $36 billion of that was in pharmaceutical products and $20 billion in organic chemicals. It must be noted, World Trade Organisation protocols include a clause that prevents tariffs placed on pharmaceuticals.
The current corporate tax rate in the US is 21 per cent. Even if that were to be lowered by the incoming Trump administration, is it debatable that it would have the immediate effect of luring companies home given the fact that, as Mark Blyth puts it, “everyone in the Trump administration, in our previous experience, ends up in the woodchipper within six months”.
He asks: “Why, then, would you put your faith that anything these guys are doing will lead to a more stable and prosperous future than the one you have engineered for yourself?”
Economic debate rages as to the potentially ruinous effects Trump’s planned tariffs may have on the domestic US economy, driving the inflationary cycle into an even more vicious period. That, combined with the planned mass deportations and the destabilising potential of sweeping tariffs, leaves everyone in the dark as to what might happen over the coming two years.
That general uncertainty, Blyth argues, is of more concern to Ireland than specific threats.
He says that even if the Trump administration drops the corporation tax rate, it is unlikely firms are going to be naïve enough to think they’re getting a great deal by moving back to the US, giving up all of the access they’ve got to the EU and the highly skilled Irish labour force for the sake of “an extra five per cent of a tax break”.
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