US tariffs are not expected to have a big impact on the Irish economy, with the Central Bank of Ireland predicting only a minor hit to growth in the long run.
In an analysis published alongside its latest quarterly economic bulletin, the financial regulator said the new EU-US trade deal, which applies a tariff of 15 per cent to most EU exports, was unlikely to lead to any significant reduction in existing foreign investment.
“In the absence of more significant policy shifts, multinational activity in Ireland is unlikely to change dramatically in the coming years given the substantial sunk costs of investment, though corporate tax receipts from MNEs [multinational enterprises] could change much more rapidly,” it said.
It predicted the protectionist trade measures being deployed by Washington would see Irish national income being in the region of 1 per cent lower over the long term than it might have been in the absence of tariffs.
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“This is the equivalent to approximately 3,000 fewer jobs being created than what would otherwise be the case over a 10-year period,” it said.
The Central Bank’s analysis, however, warned that if the tariffs were accompanied by broader changes to US tax and industrial policies, there was a risk of lower investment flows “and restructured MNE value chains”.
“This could hinder the growth of economic activity and employment in Ireland, further exacerbating challenges for the public finances.”
It also warned that the trend towards trade fragmentation could affect the structure of the economy here.
“A more competitive landscape for attracting FDI [foreign direct investment] may result in a lower long-run share of MNEs in aggregate activity, with accompanying lower investment and spillovers to the rest of the economy,” it said.
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Robert Kelly, the bank’s director of economics and statistics, said the economic outlook was not as favourable as it would have been had US tariffs not been introduced, but the tariff rates covering EU-US trade are lower than had been expected earlier in the year.
“Policy uncertainty still remains relevant both domestically and globally and Irish economic growth is expected to be impacted,” he said.
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In its latest bulletin, the Central Bank said addressing the long-term challenges posed by geoeconomic fragmentation requires tackling the same constraints to domestic growth – by closing infrastructure gaps in water, energy, transport and housing.
In its report, it projected the economy here would grow at a stronger-than-expected 2.9 per cent this year, reflecting the pickup in exports in advance of US tariffs in the first quarter.
Growth will moderate to 2.2 per cent and 2.4 per cent in 2026 and 2027, it said.
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The regulator noted that the projection for housing completions had been revised downwards for 2026 and 2027, with constraints in water and energy infrastructure expected “to be marginally more binding on the number of dwellings that can be delivered in those years”.
Housing completions are forecast to stand at 32,500, 36,000 and 40,000 in 2025, 2026 and 2027, respectively.
The Government’s housing targets aim for a total of 300,000 new homes to be built by 2030, starting with 41,000 homes this year and rising incrementally to 60,000 homes a year by 2030.
