Pundits and politicians have warned us for months of the apocalyptic outcome of a second Trump presidency in the US. They have told us that Trump’s America First policies would lower the US Corporation Tax and all of Ireland’s Foreign Direct Investment would disappear overnight. Further, Trump will heavily tariff Irish trade, destroying the Irish economy and installing Donald Trump as the Lord Mayor of Hell. Meanwhile, the Irish government – and even its challengers – have stayed mute on any Plan B in case the worst were to come to pass. It’s almost like no politician believes that transatlantic trade could ever be uncoupled.
This week, Trump nominated his new Commerce Secretary, Howard Lutnick. A Wall Street veteran, Lutnick has long been critical of America’s reliance on Ireland for trade. His tweets are back in the news in Ireland, stoking more fear of what the future has in store.
One week out from the Irish election, let’s take a look at what we’ve been told about the Trump-Lutnick future and how the next government leaders should be positioning themselves in this election.
Trump Tax Cuts
First, let me level with you: Trump’s tax cuts will not – and cannot – affect Ireland. Under the OECD minimum tax rate, no country can lower their taxes below an effective rate of 15%. It was utterly bizarre that Ireland signed up to this agreement, but they did, in fairness, negotiate a carve-out. Any corporation earning less than €750M a year can stay on the original 12.5% rate. This means that no country can undercut Ireland’s tax rate, and except for major corporations, no country can even match what Ireland offers.
Add to that, Trump’s tax cuts aim at bringing manufacturing jobs back to the US from places like Taiwan, China, and India. In order to qualify, a company would need to operate 100% of its business, including manufacturing, in the US.
Ireland’s Strength
Ireland benefits from two main sectors from the US: tech and pharma.
Ireland is home to one-quarter of the world’s tech companies. Meta, Google, Microsoft, and countless other household names have incorporated their EU headquarters on our shores. The thing is, even if Trump offered a negative tax rate, they wouldn’t move. Under GDPR, the EU Directive that has increased pop-ups on your browser by 10,000% since 2018, these companies must be incorporated in the EU to process the data of European citizens. Ireland has only 26 competitors, and none of them look particularly attractive to Silicon Valley.
The Irish pharma sector also wouldn’t move. It’s hard to see Johnson & Johnson packing its bags after 90 years just so it could pay the same – or 2.5% more – in tax in the US.
Trump Tariffs
The next issue is Trump’s tariffs. Aimed more broadly at larger trading blocs like the EU, it’s relevant to Ireland as one of America’s main European trading partners. But it’s wholly unlikely that a 10% tariff on goods would offset the many reasons for tech and pharma to stay in Ireland. In any case, a significant portion of the US money flowing into Ireland is from US companies moving profits to the tax haven. Licensing patents and trademarks from Irish subsidiaries is how these companies take advantage of Ireland’s tax system in the first place. Is it any wonder why the cost of these licenses roughly equals the amount of money the companies don’t want to pay tax on?
In any case, Ireland needs to look out for its own economy. It should be prepared for trade partners to get a little protectionist from time to time. It should expect that a country might not put Ireland as high up on its priorities list as Ireland puts the US.
Asking For It
A more pressing issue is how Ireland has been spoiling for sanctions from the US over the last few years. For a century of diplomatic relations, Ireland’s main foreign policy with the US is a bowl of shamrock in the White House every St. Patrick’s Day. Recently, however, Irish leaders have been pushing the line. After the Irish Government formally recognised Palestinian sovereignty in May, former Trump staffers were happy to go public to speculate about retaliation from the most pro-Israel President in history. Not 12 months ago, Vice President-elect JD Vance called for “China-style sanctions” on Ireland if it passed its draconian Hate Speech bill. As Ireland tries to lead the world into the 21st century, it bites the more conservative hand that feeds it.
The Irish Strategy
With eight days till polling day, Irish leaders are apparently unaware of the incoming Trump administration. Every party manifesto proposes roughly the same amount of public expenditure over the next five years. But without Corporation Tax receipts, Ireland is in big trouble financially. A wise policy researcher would stick their finger in the air and realise there’s room in the Irish debate for more conservative economics. They could take a leaf out of Elon Musk’s book to reduce spending and diversify income. Policies like Fine Gael’s Acorn Fund will provide little-to-no real benefit and are nothing more than cheap bribes ahead of polling day. Sinn Féin wants to re-unify with the six counties, seemingly unaware of the financial toll on the State to join with a jurisdiction where 60% of its citizens are employed by the government.
A concerned government would diversify its income sources to shield it from the whims of other countries. A strategic politician would store up more robust budget surpluses to weather future storms. An ambitious future Taoiseach would use that financial warchest to be even more aggressive in international trade in the future.
But why focus on that when you’ve got travel plans in March?
