The precise shape of the threat from Donald Trump’s presidency to Ireland’s exports and tax revenue is still not clear. However, it is obvious that danger lies ahead. Trump has threatened tariffs, which would hit Irish exports and has withdrawn from the OECD deal on corporate taxation. Tensions also lie ahead on regulation, where the new president, no doubt encouraged by his business support base, has criticised European regulation of US technology companies.
As the European home for many giant US companies, Ireland will be at the centre of these interlocking stories. Dealing with the fall-out will be complex; finance minister Paschal Donohoe and Simon Harris, who takes responsibility for trade as part of his foreign affairs brief, will be central figures, but this will involve the Taoiseach and other ministers too, and Ireland’s diplomatic service.
There are a few priorities. Ireland needs to learn what it can about what Trump will actually do – which will not be easy given his unpredictable nature. The move by Harris to convene a new trade council to focus on promoting exports to the US is welcome. Ireland also needs to make its own case in Washington. However, in terms of negotiating with Trump, we are part of a wider EU trading bloc, which manages trade issues on behalf of member states.
Ireland may, at times, find itself trying to tone down tensions between the US and EU, or encouraging negotiated agreements rather than trade wars. But if push does come to shove, then Ireland has to act alongside other EU members, for example if there is a decision to impose tariffs on US imports as a retaliatory measure.
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On tax, the outlook is now complicated following Trump’s withdrawal from the OECD deal. Ireland’s reliance on corporate tax revenues from US corporate giants means there are significant vulnerabilities here, too. Already Trump is indicating that he will cut the tax rate for companies manufacturing in the US and he may try – via rhetoric, tax measures, or a mixture of both – to get intellectual property assets housed in countries like Ireland relocated back to American. Irish jobs and tax revenues could both be at risk.
Ireland has a case to make in the value of an Irish base for US companies – and the value of Irish investment in America. But in the strange economic world of Trumpism, Ireland’s large surplus in trade in goods with the US is looked on negatively and may prompt some policy moves, or some hectoring of companies investing here and exporting back to the US market.
Add in the regulatory issues and it is clear that a busy agenda lies ahead for Irish economic diplomacy. And it is vital that wider budgetary policy, too, takes account of the risk that some trouble may well lie ahead and the need to have enough leeway to respond.
