What Does Donald Trump’s Second Coming Mean for Ireland?
Introduction
The predictions of an extended period of stress during which none of us could be certain what would happen proved false. In the end, it was all over quickly. No need for days of counting, court procedures to declare state victories, or bloody insurrections as denialism spread. Donald Trump is the President-elect. He won quickly and emphatically. To lean on an old cliche, the result was shocking but not surprising.
The only surprise, perhaps, was the scale of the victory. Trump is the first Republican candidate to win the popular vote in twenty years. At the time of writing, he has won the Senate with the House still in the balance but likely to follow. He will rule with a clear mandate and the provisions in place to enact his agenda. That has implications for the entire world, with Ireland especially likely to be affected by his proposed policies.
Trump’s plan: A reminder
Trump has always been an ‘America First’ candidate. That is reflected in his rhetoric but also his fiscal and monetary policy. The two core economic pledges he made that look set to drastically shape Ireland’s future revolve around corporation tax and trade tariffs. And the prognosis for Ireland is not good. As the Irish Examiner observes, “While the Irish economy was not hit too hard by Mr Trump during his first term — the covid pandemic saw to that — it might not be so lucky to escape it this time unscathed.” [1]
US companies in Ireland
To quickly explain why Trump’s victory has such pronounced implications for Ireland (just in case anyone hasn’t been following along), Ireland has made itself increasingly dependent on US businesses. It lured these businesses to the country with favourable tax rates, part of the country’s foreign direct investment (FDI) model. The rate is currently 12.5% for businesses with revenues of less than €750m and 15% for those with more. As such, after Brexit, Dublin stepped up to be the most popular place for US companies to set up EU headquarters. [2]
In 2024, there were 970 US companies in the country, employing about 210,000 people and spending more than €41bn in the local economy annually, according to the American Chamber of Commerce Ireland [3]. Most of the top ten US tech companies, including Microsoft, Meta, Amazon, Google (Alphabet) and Apple, are present in Ireland, surging the country’s digital economy to $50bn (€46.66bn), making up 13% of GDP. [4]
This economic model has been kind to Ireland. But it was a swelling bubble that was always likely to burst. As the Independent puts it, “We know Irish public spending has been floating since 2015 on an unsustainable level of corporate tax collected here from US multinationals. It has been the ultimate free lunch, but the Trump agenda is a direct threat to that bonanza.” [5]
Corporation Tax
Trump has said he will cut the headline US corporation tax rate from 21% to 20%, and to lower the rate to 15% for companies that manufacture at home [6]. If put into practise, this shift in US corporate tax could essentially nullify the rates that have made Ireland so attractive to corporations and so competitive these last few years.
The latest figures show that the government has taken in €76.3bn in tax during the first 10 months of the year, up almost 15% on the period in 2023 [7]. Corporation tax made up almost 36% of that. If companies start flooding elsewhere, the government will quickly find itself taking in considerably less money each year, which will obviously then have implications for government spending. It all boils down to how companies react to any such changes. Even if only a few big names such Apple, Google, Microsoft, Amazon, or Pfizer upped sticks, the implications would be enormous.
The question, then, is whether such a move is likely.
The appeal for the companies is obvious. Many of these are American-founded businesses, with a huge US clientele and the draw of beneficial rates while based in the world’s leading economy. But it is not guaranteed that companies will choose to leave. The Irish Examiner points out that these companies have spent decades investing in Ireland, building their workforces and infrastructure [8]. Equally, Ireland is their entrypoint to the EU, another key market.
Other possible good news for Ireland is that there’s no guarantee that Trump passes these plans. The former and future President has precedent in making promises he doesn’t quite keep –– anyone who remembers the infamous claim of the border wall with Mexico, paid for by the Mexicans, may be able to attest to that. It’s possible these tax changes were nothing but campaign bluster. That said, even if they were not, just because Trump wants these changes to regulations doesn’t necessarily mean they will pass through Congress. As noted, at the time of writing, votes for the House of Representatives are still being counted. If the House swings to the Democrats, you can bet they will block any such changes (in stark contrast to Trump’s pledges, Harris wanted to hike corporation tax from 21% to 28% [9]). That said, a Republican-controlled House and Senate is looking increasingly likely.
Tariffs
Trump’s other economic threat has been major news and a source of great controversy. He has said he will impose a 10-20% tariff on most imported goods and a levy of 60% on goods imported from China [10]. He contends that by doing so, American jobs and manufacturers will be protected due to the added expense of imported options. This, too, would have a severe impact on Ireland.
Chief economist at the Institute of European Affairs Dan O’Brien went as far as calling the potential tariff on all goods shipped to the US the “biggest near-term risk” to the Irish (and European) economy, in a LinkedIn post before the elections. “The promised tariffs will have a trade destruction effect, with a knock-on impact for jobs and profit tax revenues,” he said. [11]
The Independent reports that in 2022, Ireland exported goods valued at $63.1bn (€58.7bn) to the US, compared to €22.2bn sold to the UK, the country’s nearest and traditionally biggest trade partner [12]. Last year, exports from Ireland accounted for one-eighth of the EU’s total exports to America [13]. As such numbers demonstrate, over the past fifteen years US multinationals, in the pharmaceutical industry especially, have based their factories in Ireland and then exported goods back to the US, rather than just exporting them to European trade partners.
If the corporation tax alone wasn’t enough to entice companies to base themselves in the US, these export tariffs working in tandem with the low corporation tax just might. Not to mention that a 10% to 20% tariff on goods would make Irish products uncompetitive in the US, reducing a vital source of revenue for Irish companies.
Unlike tax changes, Trump wouldn’t need to pass tariffs through congress as they can be imposed by presidential order. It’s not just Ireland that would be affected by such changes but the whole world. The introduction of 10% tariffs would mark a major shake-up of the global economy, which the London-based National Institute of Economic and Social Research (Niesr) predicts could see a fall in US GDP growth and jump in inflation [14]. Niesr also noted that “small open European economies” like Ireland could see a real GDP-hit of 3-5% in the next five years. [15]
Other impacts
Corporation tax and tariffs are the obvious Trump policies that would have a severe impact on Ireland if imposed as planned, but there are other less obviously discernible effects. The effect a second Trump term will have on the financial sector, for example, is difficult to predict. So too is the effect on the aviation industry, though many in the sector have warned that Trump’s tariff plans could have serious implications for the industry’s global supply chains [16]. Given that Ryanair recently blamed its latest quarterly profits drop on Boeing’s delivery delays, one can only assume that further disruption to supply chains will see similar delays and a similar loss in revenue as a result.
Equally, the environment is unlikely to even be a secondary or tertiary consideration for the Trump administration. It is more likely to not be considered at all. Rather, one of Trump’s central pledges was to “drill, baby, drill”. Ireland, like much of Europe, indeed much of the world, is working to bolster its sustainable credentials. Whether there will be any global spillover effect from the US meeting environmental concerns with a shrug is yet to be seen, but it is a point of concern.
What does Donald Trump’s second coming mean for Ireland?
Donald Trump’s emphatic return as President-elect brings with it a wave of uncertainty for Ireland, but one thing remains clear: the country must brace for potentially transformative economic repercussions. Trump’s commitment to his ‘America First’ agenda signals a threat to Ireland’s economic model, which has thrived on competitive corporate tax rates and robust relationships with US multinationals. The possibility of slashed corporate taxes in the US and the imposition of substantial tariffs on imports could challenge Ireland’s appeal as a business hub and undermine its export-driven economy.
While there is hope that campaign promises may remain unfulfilled or encounter legislative hurdles, the risks posed to government revenue, job security, and economic stability cannot be ignored. As Ireland navigates these uncertain waters, resilience and strategic adaptation will be critical to sustaining its economic prosperity in a potentially transformed global landscape. The coming months will test Ireland’s ability to pivot and adapt. The hope must be that the nation’s economic ingenuity will find a way to weather the storm.
Sources
[1] https://www.irishexaminer.com/business/economy/arid-41511047.html
[7] https://www.irishexaminer.com/business/economy/arid-41511047.html
[8] https://www.irishexaminer.com/business/economy/arid-41511047.html
About the author
