It is a reflection of the world today that the visit by an Irish taoiseach to the White House can be judged a success, even as the US president issues serious threats to the Irish economy.
Micheál Martin did indeed do well in his encounter with Donald Trump, but the US president still spoke about Ireland “stealing” American pharma investment and continues to threaten the imposition of significant tariffs on EU imports. And little store can be put on Trump’s assurance that he does not want to hurt Ireland, when shortly after meeting the Taoiseach he threatened swingeing 200 per cent tariffs on EU drinks exports to the US, posing a serious threat to the Irish spirits industry.
The saga over the drinks trade – the EU had threatened tariffs on some US drink products in retaliation for US tariffs on steel and aluminium – shows how trade wars quickly build. It also illustrates the delicate diplomatic challenges facing Ireland.
Trump’s response to the EU move, if implemented, would threaten exports and jobs in Ireland. But as the EU negotiates on trade on behalf of member states, Ireland has to implement what is decided in Brussels . Given Ireland’s particularly large trade exposure to the US, Irish ministers will be pushing the line that the two sides should negotiate and trying to minimise the immediate EU reaction. However, others in the EU will want to respond more strongly to Trump’s bullying trade tactics – and this is what is likely to happen.
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The wider point here is that Ireland may struggle to get a hearing for its views – or for the threats to the Irish economy – from other EU member states. The State is seen to have done very well in recent years and the stellar growth in corporate tax revenue in particular has been noted in Berlin, Paris and other EU capitals, as well as in Washington DC. While other countries are considering where to cut, or how much to borrow, to fund extra spending on defence, Ireland – with a strong budget surplus – still spends much less in this area.
None of this positions Ireland well as the State tries to do what it can to stop the outbreak of tensions between the US and the EU from turning into an outright trade war. And there is no doubt that this is now a live prospect. Despite wobbles in the financial markets and fears of a US recession, the Trump administration seems intent on pushing ahead with much more significant tariffs than those announced to date. And while the EU will negotiate when it can, there is little doubt but that it would also retaliate and that this in turn would further up the ante.
There is probably still a brief window in which a transatlantic trade conflict could be avoided. But if, by early April, Trump goes ahead with further tariffs, then the omens will not be good. And Ireland’s economy will be on the front line.
