As many as 25,000 fewer jobs would be created in Ireland if the European Union (EU) fails to secure a trade deal with the US to limit the impact of tariffs, the Department of Finance has warned.
In its “annual progress report” to the European Commission, the department warned of the “far-reaching” consequences for this country of Washington’s increasingly erratic trade policy.
If the current 10 per cent tariff on US imports from the EU remains in place, growth in the domestic economy here is expected to slow to 2 per cent this year and to 1.75 per cent in 2026.
This represents a cumulative downward revision to growth of 1.5 per cent over two years.
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Unionists must ask themselves: ‘is this as good as it gets?’
The department also warned that there would be 25,000 fewer jobs created in the economy, with the labour market growing at a slower rate than would have been the case in a non-tariff scenario.
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Even before the impact of tariffs, corporation tax is expected to be €2 billion lower than previously forecast, at €29 billion, due to declining profitability at multinationals.
Significantly, the department’s report did not model the likely impact of US tariffs on pharmaceuticals, which account for more than 50 per cent of the State’s export trade.
In February, the value of Irish exports to the US jumped by 210 per cent as multinationals stockpiled pharmaceuticals in the US ahead of Donald Trump‘s tariff announcements.
The US president has vowed to reshore pharmaceutical manufacturing in a bid to correct the US’s trade imbalance.
Even if the current 10 per cent tariff regime between Europe and the US is removed, the department’s report said growth in terms of modified domestic demand (MDD) would be half a percentage point lower than previously forecast, at 2.5 per cent, because of the current disruption to global trade.
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“Given the elevated level of uncertainty, it is important to stress that our assessment published today is more akin to a scenario analysis; my officials will, of course, continue to monitor incoming data and developments and update numbers accordingly,” Minister for Finance Paschal Donohoe said.
“Even in the absence of any further changes in tariffs, there is evidence that firms and households are adopting a ‘wait-and-see’ approach,” he said.
“In other words, they are holding off on big-ticket purchases; this is also a feature in other economies,” he said.
The EU is understood to be preparing to announce a further range of US goods it could hit with retaliatory trade tariffs, as efforts to negotiate with Washington fail to make headway.
EU negotiators are becoming increasingly frustrated with the lack of inroads being made in their efforts to strike a deal with the US, that would suspend import tariffs Mr Trump has slapped on transatlantic trade.
While market turmoil forced Mr Trump to scale back higher tariff rates he placed on most trading partners, the 10 per cent import tax on most goods sold into the US remains. Steeper 25 per cent tariffs on imports of steel and cars also remain in place.
A 90-day pause Mr Trump announced on the 20 per cent blanket tariffs put on nearly all EU products is due to run out in mid-July.
The European Commission, the EU’s executive arm that sets trade policy, is now planning to increase the pressure on the US to cut a deal.
An initial package of counter-tariffs on €21 billion of US goods, such as soybeans, oranges, clothes and steel, has been temporarily suspended, to give negotiations a chance during Mr Trump’s three-month pause.
