The Irish economy dodged a bullet this year. Several of them, in fact. Back in April, we were trying to count the cost of Donald Trump’s tariff threats and his demand that American multinationals relocate production to their home market. This week, official Irish figures showed that we have so far got away with it. It will be another record year for corporation tax – €10 billion was taken in during November alone – and the economy continued to record steady growth right into the third quarter of the year, outpacing all the big EU economies. Against the backdrop of all the uncertainty, this is remarkable.
The 10 per cent plus annual growth in Irish GDP recorded this week by the CSO will be rightly written off across Europe as more “leprechaun economics”. But what is easily missed in this debate is that, excluding all the multinational distortions, the domestic economy – the bit relevant to our lives – grew by around 5 per cent. Consumers are spending and businesses are investing. There are signs that the jobs market is slowing, with retrenchment in parts of the tech sector in particular. But 2025 was another decent year for the Irish economy.
It all looks so different from Trump’s “Independence Day” last April. Official estimates were, for example, that a threatened 20 per cent tariff could lead to Ireland’s vital pharma exports to the US halving over the next five years.
Yet while new tariffs were imposed on a range of exports to the US under a trade deal finally done with the EU, their scale was much less than feared and most Irish products have so far escaped. There is, as yet, no tariff on pharma exports to the US and we have a commitment from Washington that these will not go higher than 15 per cent. A report, expected by last summer, investigating the activities of pharma companies under section 232 of a 1960s act – regarded as a prelude to action – has yet to see the light of day.
So do we conclude that the Trump risk has passed? I don’t think so, though it is clear now that he tries to get his way through chaos and over-the-top threats. As has been said, he needs to be taken seriously, not literally. One of the two things that we hoped would stay his hand a bit – the impact of higher prices on US consumers as a result of tariffs – is, indeed, doing so. The other – the risk of a bursting of the bubble in the US financial markets – has not yet happened, but is still a risk.
Danger for Ireland remains in Trump’s unpredictable political and economic agenda. He has put pressure on big companies like Pfizer, who have cut costs to American consumers and are promising to invest more in the US. More company-by-company deals can be expected. The US has recently done a zero-tariff deal with London, which involves the UK’s National Health Service paying more for drugs it buys from the US.
How this all plays out for Ireland remains unclear. There has not so far been the scale of pharma project cancellations seen in the UK – and some big plans remain on track, such as those for a new Eli Lilly plant in Limerick. The pipeline after the current phase of projects, however, may start to dry up, or at least slow significantly. The State has done so well out of pharma investment since around 2015 that a continuation of new plants on the same scale is very unlikely, even before you start to consider Trump’s demands. The focus will be holding what we have and building where we can.
Meanwhile, the other main multinational engine – the tech sector – seems to be going through some retrenchment, with job numbers falling, while serious transatlantic tensions remain on the regulation of digital services. Trump tensions haven’t gone away, in other words, and his economic nationalism remains a threat to a state reliant on being a bridge between the US and Europe.
Trying to forecast in this environment is near-impossible, but there is no reason to expect an imminent downturn. And corporation tax is set for further growth next year as the new 15 per cent rate on the biggest companies kicks in.
With full coffers, the Government is going to come under relentless pressure on the cost-of-living issue. Wages continue to rise on average ahead of prices, but, as inflation picks back up towards three per cent, the gap is small – and price levels remain high. The Coalition is already promising a new childcare strategy in the weeks ahead and we can expect more initiatives.
The big question is how much the Government can afford to do, given that it is also planning to spend a bag of money on the other areas where it faces big pressure – its vital infrastructure plan covering houses, water, power and social services like hospitals. If the plan launched this week to accelerate infrastructure provision is not seen to work, then the Coalition really will be in trouble. But if it spends on all fronts, it will be storing up problems for later in its term.
New Minister for Finance Simon Harris – who has dubbed himself “Sensible Simon” – will find, as did “Prudent Paschal” before him, that voters take economic growth for granted. If GDP was the measure of political popularity, Fine Gael and Fianna Fáil would have swept back into power with a big majority.
The overall state of the economy would again quickly be a focus if things started to go wrong: just look at the pressure on governments in the UK, France and Germany. But here voters are asking what the pay-off is for them, and what the Government is doing to make their life better. Many have benefited from the period of strong growth – some handsomely. But many others feel left out. GDP figures don’t cheer you up if you are juggling a multi-hour journey from the commuter counties with childcare costs and higher grocery bills.
As Minister for Finance, you really can’t win. You get blamed when the headline figures are poor and get little credit when they are good, and just face demands to distribute more and more. Simon Harris’s sensibleness will soon be put to the test.
