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For Ireland, Trump’s return to White House is akin to Brexit referendum result, says Goodbody report

Risks to the Irish economy from the new Trump administration are ‘skewed to the downside, including tariffs and corporate tax changes’

Donald Trump: he returned to the White House last week threatening tariffs and tax changes. Photograph: Matt Rourke/AP
Donald Trump: he returned to the White House last week threatening tariffs and tax changes. Photograph: Matt Rourke/AP
Mon Jan 27 2025 - 05:00

Donald Trump’s return to the White House presents a similar threat to the Irish economy as the Brexit referendum result in 2016, with a whole-of-government approach needed if the State is to maintain its competitiveness against a raft of new trade tariffs and tax measures promised by the US administration, according to the latest economic analysis by stockbroker Goodbody.

Goodbody chief economist Dermot O’Leary said the risks to the Irish economy from the new Trump administration were “skewed to the downside, including tariffs and corporate tax changes, but there are potential upsides too from better US dynamism and increased profitability from US firms based in Ireland”.

“Ireland currently runs a good trade surplus and a significant services trade deficit with the US,” Mr O’Leary said. “The surplus is primarily due to pharmaceutical exports, while the deficit is driven by imports of business services, royalties, licences, and R&D. A detailed breakdown of trade flows emphasises the importance of the pharmaceutical sector in Ireland’s exports and the role of multinational activities in the services deficit.”

Mr O’Leary said that while policymakers here have little control over US policy decisions they can prudently manage the public finances to mitigate risks. “Our suggested measures include maintaining high levels of capital spending, linking payments into savings funds with estimates of windfall corporate tax receipts, and targeting a balanced budget excluding windfalls. These steps will aim to ensure fiscal stability, maintain competitiveness in infrastructure and address long-term pressures on public finances.”

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The report noted Ireland’s exposure to the US, with 72 per cent of foreign direct investment (FDI) coming from America. In addition, US companies account for 10 per cent of private sector employment here, compared to an EU average of 2 per cent.

And US companies contribute 83 per cent of our corporation tax receipts. “Changes to corporate tax laws in the US thus provide the biggest vulnerability in our view, especially with regard to the taxation of intellectual property,” said the report. “Wholesale reshoring of physical activities and jobs is less likely due to the need for a presence in the EU, Ireland’s attractiveness and long track record of hosting US FDI and the fact that it is an ally of the US.”

The Goodbody report said consumer spending in Ireland has remained strong, supported by low unemployment, rising wages, and falling inflation. “Various economic indicators, such as employment growth, wage increases, and consumer confidence, show positive trends. Recent ECB rate cuts are expected to help consumer spending further by improving purchasing power and lending affordability.”

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