A new study has warned that the imposition of US tariffs on European Union goods could have severe consequences for the Irish economy, potentially leading to job losses, multinational relocations, and damage to public finances.
The working paper, published by the Economic and Social Research Institute (ESRI) and the Department of Finance, projects that Ireland’s domestic economy could contract by 2% over the next five to seven years if such tariffs are enforced. The broader Gross Domestic Product (GDP), which includes the contributions of multinational companies, could see a sharper decline of 3.5%.
The study further indicates that non-tariff barriers—such as regulatory restrictions on Irish exports—could reduce GDP by 3% and shrink the domestic economy by 1.5%.
Export Sector at Risk
The report highlights that Ireland’s traded sector, which includes key multinational industries such as pharmaceuticals and technology, would be disproportionately affected due to its deep integration with the global economy. The sector could see production fall by 4%, compared to a 2% decline in the domestic economy.
The report warns that protectionist measures targeting high-value sectors in Ireland could have a particularly damaging effect, given that jobs in these industries are often higher paid and require a more educated workforce.
Dr. Paul Egan, a research officer at ESRI, emphasized the severity of the potential impact.
“Our research shows that protectionist policies have the potential to significantly impact the Irish economy, with the traded sector disproportionately affected,” he said. “This, in turn, would lead to a significant impact on the labour market, consumption, and the domestic economy as a whole.”
Dr. Egan also cautioned that US tariffs could make it more attractive for multinational companies to relocate their operations to the United States, posing further risks to Ireland’s economy and public finances.
Government Response
The study examined scenarios where the US unilaterally imposes import taxes of 10% to 25% on the EU and the rest of the world, as well as a scenario where the EU responds with reciprocal tariffs. It also considered the impact of a 10% non-tariff barrier, which could restrict market access for Irish exporters.
Minister for Finance Paschal Donohoe acknowledged the rising uncertainty in global trade relations and stressed the importance of preparedness.
“The possibility of tariffs on transatlantic trade cannot be ruled out,” he said. “Government must, of course, plan for all eventualities, and the work being published today by my Department and the ESRI provides one piece of the analytical jigsaw needed to chart a way forward.”
Donohoe reaffirmed Ireland’s commitment to free trade and emphasized the country’s strong economic ties with the US. He also highlighted ongoing government efforts to improve Ireland’s business environment, including increased investment in key infrastructure such as energy, water, transport, and housing to ensure long-term competitiveness.
Sinn FĂ©in Calls for Caution
Reacting to the ESRI report, Sinn FĂ©in finance spokesperson Pearse Doherty urged caution and warned against escalating trade tensions with the US.
Speaking at Stormont, Doherty described the report as “helpful” in outlining potential risks but argued that the best course of action would be avoiding a trade war altogether.
“The only way to win a trade war is not to be involved in the first instance,” he said. “I would hope that what we need now is discussions between the American administration and the European Union to recognize that this is not in the interest of any citizens, whether they’re European or American.”
Doherty also stressed the need for increased domestic investment in infrastructure and housing to strengthen Ireland’s economy and maintain its competitive edge in the face of global uncertainty.
As concerns grow over US-EU trade relations, Irish policymakers are closely watching developments and preparing strategies to mitigate potential economic disruptions.
