US president Donald Trump’s proposed tariffs could directly affect about a third of all Irish goods exports, while his plan to cut corporation tax would reduce our own tax take as well as our attractiveness for investment, according to a new report from KPMG.
Ireland’s exports to the US in the first 11 months of last year were worth more than €67 billion. Although Mr Trump did not include the EU in this first round of charges, he said on Monday that tariffs on the bloc will “definitely happen”.
The latest KPMG Economic Outlook shows 2025 has begun with “significant uncertainty”, with US threats of tariff, reshoring manufacturing and potential changes in direction of global fiscal policy clouding the outlook.
Domestically, Ireland still sees “strong levels of demand” for infrastructure, goods and services, and, if anything, the country’s “biggest challenge” is meeting its own domestic demand, the report said.
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Trump’s tariffs could directly affect about one-third of all Irish goods exports, KPMG warns
KPMG economist Daragh McGreal said the global economy is now “highly dependent” on the political choices of a few decision-makers. “Tariffs have become a key concern, and economies are vulnerable to their implementation,” he said.
“European growth is sluggish, and Ireland faces clear headwinds. However, the real effects of US policy changes and resulting trade impacts will not be immediate. Ireland must highlight its two-way investment value to the US and address domestic bottlenecks.”
While Mr Trump’s proposed tariffs could directly affect about a third of all Irish goods exports, some US research shows that such tariffs would have “an outsize impact” on US consumers.
“This could, in turn, weaken the political momentum behind the administration’s tariff agenda,” according to the report.
“President Trump’s proposals to reduce corporation tax are gaining traction and the working assumption in Ireland is that this will reduce our own corporation tax take as well as our attractiveness for FDI.”
Mr McGreal said Ireland “remains an appealing choice” for investors, and multinational businesses already here are “unlikely to move back to the US”.
“Many multinationals may see corporation tax changes as a part of a four-year cycle, rather than as a fundamental long-term shift in US tax policy,” he said.
The report found there is “broad consensus” that after a decline of 0.5 per cent in GDP in 2024 due to technicalities in multinationals’ activities, GDP will return to growth in 2025, which KPMG believes could be in the range 4-4.5 per cent.
Modified domestic demand, a more representative signal of domestic economic performance, grew more strongly in 2024 at 2.6 per cent and KPMG expects growth of 3-3.5 per cent in 2025.
While Government supports cushioned the impact of inflation for many Irish citizens in 2023 and 2024, many of these are expected to be discontinued this year.
KMPG said recent increases in European wholesale gas prices, and a planned VAT increase on energy bills from 9 per cent to 13 per cent in April are “likely to put upward pressure on energy costs for businesses and households”.
Furthermore, there is a “clear risk” that employment growth flatlines or potentially reverses this year.
“We are reaching the upper limits of labour-force participation for some cohorts and continued jobs growth can only come from additional labour activation or inward migration,” the report said.
In addition, tourism numbers have not returned to their pre-pandemic levels, and “continue to dampen” hospitality sector expansion.
On housing, competition for materials and labour will increase, pushing up construction costs.
On the other hand, falling interest rates at the euro zone level will increase the quantum that homeowners can borrow. “These dual impacts can be expected to continue to drive up house prices this year,” the report said.
“First-time buyers and movers may need to save more to purchase their homes, reducing overall consumption elsewhere in the wider economy.”
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