The incoming Trump administration in the US could pose a particular threat to the Irish economy, while endangering US-European trade and driving internal divisions between EU member states, Government Ministers have been warned.
A private briefing note – drawn up for Ministers and senior Government officials before Tuesday’s election to understand the possible impact of a Trump victory – flags concerns about the future relationship between the EU and the US, with particular issues raised about trade and the possibility of Donald Trump imposing tariffs on EU goods, followed by retaliation from Europe.
While Irish officials believe Mr Trump is likely to concentrate on domestic priorities such as immigration in the opening phase of his presidency, a more aggressive stance towards China could also pose difficulties for the EU. Ireland is also likely to face further pressure over the progress of the Occupied Territories Bill curtailing trade with Israel.
Amid enthusiasm for Mr Trump in some EU capitals, notably Viktor Orban’s government in Hungary, the note outlines that there were fears, pre-election, that he could have used a meeting of EU leaders in Budapest later this week to recognise a Trump victory, if an outcome had remained undecided at that stage.
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Senior Ministers privately believe that Europe faces a “significant moment” with a potential challenge to its internal cohesion and that the European Council must now move to counteract any threats to unity among member states.
The briefing note also warns that Mr Trump’s promise to reshore profits and jobs poses a particular threat to Ireland given the importance of US companies to the Irish economy.
Minister for Finance Jack Chambers warned on Wednesday that future foreign direct investment could be at risk from a “more interventionist industrial policy” which now appears “likely” in Washington DC following Mr Trump’s second election to the White House.
Senior Government sources also confirmed that there are concerns that if Mr Trump pulled out of the OECD’s efforts to combat multinational tax planning, aspects of that process could also be dramatically undermined. This is mirrored in the note for Ministers, which outlines that the process could stall or collapse entirely.
Coalition figures in Dublin believe the result of the US election, and the heightened risks of an economic shock, will place a renewed emphasis on economic credibility during the Irish general election, which Taoiseach Simon Harris confirmed last night will be called tomorrow and held on Friday, November 29th.
Such a step could shift the debate during the election away from ambitious plans for the surplus and bring a new focus to bear on managing the economy, which one senior Fine Gael source said would help the party.
However, the imperative to invest in infrastructure and skills would be heightened by the prospect of trade tensions and headwinds to FDI, while Ireland should also move to prevent a rapid escalation in tensions between the EU and the US.
Senior Government figures also pointed out that a tariff war with the EU could drive further inflation in the US, after Mr Trump was elected on a strong mandate which saw voter concerns on the economy and cost of living put centre stage.
Meanwhile, funding a continuation of tax cuts or a further corporate tax cuts would also have implications for the US deficit which the incoming US administration would have to confront.
The note for Ministers also outlines concerns about the sustainability of corporation tax revenues from Irish-based US companies which were raised during the budget.
It outlines that there could be profound implications for Ukraine from a Trump presidency, which would have knock-on effects on EU security, especially if the US security guarantee through Nato was called into question. This could be allied to the prospect of US withdrawal from climate accords.
Taoiseach Simon Harris said the Government was prepared for any external shocks and had prepared by setting aside billions of euros. He said Ireland had worked with US administrations of different political backgrounds, including the last Trump administration.
On Wednesday, senior Government leaders congratulated Mr Trump on his victory, with both Mr Harris and Tánaiste Micheál Martin releasing statements. However, Labour Party leader Ivana Bacik labelled the result as “devastating” and a “disaster”.
“The world faces many challenges and needs leadership to meet them. With the US and Ireland’s shared commitment to democracy and international law, we can, and will, tackle these challenges,” said Mr Harris
Mr Martin said Ireland looks forward “to working with him and his new administration in a constructive manner, as we did during his previous administration”.
Ms Bacik called on the Government to share with the opposition any briefings it had received on the risks to Ireland from a Trump win.
Nationalist politicians in Northern Ireland raised concerns about the impact of the victory on the US while unionist leaders welcomed the “decisive” result.
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