The European Commission has flagged significant risks to Ireland’s economic outlook, citing the country’s deep reliance on US multinationals amid rising global protectionism. While Ireland is expected to post solid GDP growth of 3.4% in 2025, the Commission’s Spring Economic Forecast warns that looming US tariffs could dampen investment and impact tax revenues.
The report highlights that Ireland’s strong economic performance so far this year has been largely driven by multinational corporations accelerating exports ahead of potential new trade barriers. Preliminary data suggests GDP rose by 3.2% quarter-on-quarter in the first three months of the year, supported by a rebound in exports and stable domestic demand.
However, the Commission cautions that this growth may be short-lived. “Ireland’s deep economic ties to the US pose notable downward risks in the context of rising protectionism,” it said. Concerns have been heightened by the potential return of a Trump administration and its history of trade tariffs, including a proposed 20% levy on most EU goods, currently frozen until July.
The pharmaceutical sector, one of Ireland’s biggest export drivers, is seen as particularly exposed. While current exemptions shield much of this trade, the introduction of new tariffs or policy shifts aimed at disincentivising overseas operations could significantly affect economic activity. The Commission notes that such a scenario could “significantly affect tax revenues” and potentially lead to a reduction in foreign direct investment.
Corporate tax revenues, a key pillar of the Irish budget, are also flagged as a vulnerability due to their concentration among a small group of multinationals. Much of last year’s surplus stemmed from a one-off windfall related to Apple’s back taxes following a European Court of Justice ruling, with the true structural surplus closer to 1.7% of GDP.
Despite these headwinds, the report remains cautiously optimistic about Ireland’s short-term prospects. It forecasts growth of 2.5% in 2026, underpinned by a strong labour market and real wage increases. However, elevated uncertainty is expected to keep household savings high, moderating the pace of consumption.
On a broader scale, the EU economy is expected to grow by 1.1% in 2025 and 1.5% in 2026, with inflation in the euro area forecast to ease to 2.1% this year and 1.7% next year.
EU Economy Commissioner Valdis Dombrovskis stressed that, amid global policy uncertainty, Europe must prioritise competitiveness. “The risks to the outlook remain tilted to the downside, so the EU must take decisive action,” he said.
