It’s been 2½ decades since former tánaiste Mary Harney posed the question about whether Ireland was closer to Boston or Berlin.
It was a slightly loaded binary as Berlin was code for Europe’s higher tax, tougher regulatory regime, a sort of neoliberal smear, while Boston stood for a more nimble, entrepreneur-friendly US economy.
The reality, of course, was more nuanced but we got the shorthand: Berlin’s social safety nets versus Boston’s bootstrap capitalism.
Because of her Progressive Democrat credentials and her audience (she was speaking to the American Bar Association), Harney insisted we were “spiritually” closer to Boston.
In the intervening years, we’ve perhaps flitted between the two notions.
During the Celtic Tiger years, a period of fast growth and light-touch regulation, we perhaps saw ourselves as a more dynamic US-style economy in contrast to Europe’s fuddy-duddy bureaucracy.
When the wheels came off in 2010, Europe’s rules-based system became a bastion of common sense.
It was the strait-laced Finnish bureaucrat Olli Rehn, a man said to have zero tolerance for bombast, whom Brussels sent to oversee the bailout.
Either way, the last 10 years seems to have put the question to bed.
A decade of jobs-rich growth, turbo-charged investment and an economic outlook that contrasts sharply with Europe’s puts us firmly in the US camp.
Of course much of this reflects the actual Americanisation of the Irish economy. Most of the FDI (foreign direct investment), most of the tax bonanza at the heart of the exchequer, hails from across the Atlantic.
The economy has added 906,000 jobs since 2012, 453,000 jobs since 2019. At the same time, the wage bill of the multinational-dominated sectors has risen from €8 billion in 2012 to €25 billion in 2024, making us a sort of Delaware on steroids.
This while the EU economy stagnates. Quarterly GDP (gross domestic product) growth in the single-currency area fell from 0.4 per cent to 0 per cent in the final three months of 2024, Eurostat reported on Thursday.
The stagnation underlines the challenge facing the bloc as Germany, traditionally the Continent’s powerhouse economy, struggles with a severe manufacturing downturn and political turbulence. The UK, French and Italian economies aren’t doing much better.
But tracking the US economy comes with risks. Although the growth outlook is “more American than European”, Ireland is doubly exposed to US policy uncertainty, ratings agency Standard & Poor’s (S&P) said last week.
Strong personal consumption driven by strong population growth combined with a competitive FDI offering makes Ireland relatively unique in the euro zone, S&P sovereign credit analyst Samuel Tilleray told a webinar hosted by the firm.
This explains why the economy here has a similar growth trajectory to the US (S&P expects both economies to grow by 2 per cent this year).
“The flipside of being relatively more US exposed is of course a heightened exposure to US policy uncertainty,” Tilleray said.
The main driver of this policy uncertainty is of course Donald Trump, who seems to be threatening the world and his wife with tariffs, starting with Canada, Mexico and China from this Tuesday.
[ Trump warns tariffs may bring ‘pain’ to Americans, as Canada and Mexico retaliateOpens in new window ]
After Colombian president Gustavo Petro last week refused to allow two US flights carrying deported migrants to land because they were military, not civilian, aircraft, Trump threatened Colombia with 25 per cent tariffs on all exports to the US.
The tariffs would, in theory, have led to higher prices for US consumers but Colombia was in a much weaker bargaining position on account of the US being its largest trading partner, an economic asymmetry that led – almost immediately – to the Colombian side backing down.
The episode illustrates the zero-sum diplomacy that Trump is planning to bring to US foreign relations and trade disputes.
Addressing business and political leaders at the World Economic Forum in Davos earlier this month, Trump put it succinctly: make your product in the US or face tariffs. What this threat means for transatlantic trade, which includes €54 billion of Irish exports to the US, is impossible to say, partly because what Trump says and what Trump does aren’t necessarily the same.
A bigger problem for Ireland might – in the end – be tax. The last time Trump was in power he introduced the so-called Gilti tax which targeted income from intellectual property (IP) such as copyrights, licences and patents in a bid to onshore multinational profits but it backfired, triggering a further onshoring of IP in Ireland and elsewhere. That’s likely to inform Washington’s next move.
Much of Trump’s rhetoric, however, seems directed at Germany and the country’s car exports to the US. Trump’s voter base is heavily concentrated in the so-called Rust Belt states, a region that has been decimated by the demise of the US car industry. His protectionist tendencies appear to be focused on delivering for that region, either by reviving the automotive industry there or winning new investment.
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