There is no easy way to manage the economic danger to Ireland posed by the latest tariff threats from US president Donald Trump. But there are some important steps that need to be taken.
The first is to understand the potential seriousness of what has been outlined and the danger of a damaging trade war. And to understand that the large trade deficit in goods which the US has with Ireland may put a particular spotlight on this State, as this is the key metric used in Washington to judge situations where it says American has been treated unfairly. As the Minister for Finance, Paschal Donohue pointed out, this could threaten jobs and economic growth.
Ireland needs to urge calm at EU level. Given the wider tensions between Washington and EU capitals, further inflamed by a speech last Friday in Munich by vice-president JD Vance, this will not be easy. The Irish case must be that the trade issue needs to be dealt with on its own merits. The US has made threats, but has not so far enacted them, though tariffs on steel and aluminium are due to come into force next month.
For now, the EU needs to try to understand further the process that will now get under way in Washington and what the possible outcomes are. It needs to ready its response, but also judge whether there is room for negotiation and what the Trump administration is seeking. Some believe Trump may be attracted by quick concessions which he can present as " wins.”
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Or it may be that by seeking , for example, big cuts in EU VAT rates, the US side knows it is making demands which cannot be met and intends to push ahead. If this is the case, a damaging trade war may be inevitable. The impact of this on US inflation and on American companies would be serious and could lead to a quick reversal of course in Washington.
The Government can point to the success US companies have had here and also big investment by Irish companies in America. But on the substantive trade issues negotiations will be led by Brussels – and Ireland has no option but to follow the EU lead.
Domestically, the threat has increased the risks to growth and the public finances. The Government needs to draw up contingency plans and implement proper controls on current spending. The huge surge in corporate tax receipts which fuelled spending growth in recent years may soon draw to an end – and a reversal is possible.
It also needs to focus on the competitiveness agenda – a new national plan in this area was promised for the summer. This now needs to be prioritised and advanced.
The Government cannot control what Trump will do – though it may try to influence it. But it has a large agenda at home and what is happening must be a wake-up call to get on with it.
