It is still possible for the European Union and the Trump administration in Washington to reach an agreement on trade by the beginning of August, Minister for Finance Paschal Donohoe has said.
Speaking on Monday morning he said the negotiations were at a sensitive stage.
“We are now entering into a crucial final phase of this engagement”, Mr Donohoe said at the launch of the National Treasury Management Agency’s (NTMA) annual report for 2024.
He said Ireland and the European Union did believe that some progress in the talks had been made before US president Donald Trump announced on Friday that he planned to introduce a 30 per cent tariff on goods coming from the EU at the beginning of August.
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However, Mr Donohoe said “we remain fully committed to identify if negotiation can settle the future of trade between the US and the EU.
He said it was not possible at this point to set out if any particular sectors would benefit from different treatment. However he said “we are making the case for the importance of the life science sector and a number of other sectors that are important both to our economy and the economy of the European Union”.
Mr Donohoe said the Department of Finance had not yet carried out any specific modelling on the potential impact of 30 per cent tariffs on jobs and on the public finances. He suggested that modelling on likely tariff scenarios that the Irish economy could face would be carried out in the run up to the budget in the autumn.
“We have outlined a tariff scenario of 10 per cent on exports from the European Union to the US and a high level of tariffs between the US and China. This identified a reduction in our job creation potential of up to 75,000 jobs between now and the next three to four years.”
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“If we were to see tariffs of a higher level permanently in place, that would mean that the employment and growth effect would be bigger that what we had previously modelled.”
The Minister said it was evident that the application of tariffs at a high level “would be bad for the economic growth of Ireland and would affect our job creation, potential”.
“What the exact effect could be, would depend on what exactly level of tariffs could be, and at this moment in time, with all the unpredictability, it is very difficult to forecast.”
He said there was “unsubstantial uncertainty” now regarding the outlook for the economy over the coming years.
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Mr Donohoe said that while Ireland faced new challenges, it did so at a time when the economy from a public finance perspective was on a solid footing.
“If you look at how our economy is performing from a growth perspective, you can see that in the first quarter of this year our economy grew in terms of modified domestic demand by 0.8 per cent.”
“That is a reasonably strong start to the year. But that strength is particularly evident in our labour market where we saw 2.8 million people now at work in Ireland. This is such a strong performance in terms of the number of jobs that have been created and kept in Ireland.”
He said he recognised that there were many households and businesses that were still confronted by rising cost of living and the rising cost of doing business.
However he said inflation had now been at or below two per cent for more than a year.
Meanwhile NTMA chief executive Frank O’Connor said while Ireland still had debts of over €200 billion and there was no place for complacency, the country was “well positioned against the backdrop of uncertain markets”.
“There is a strong market awareness of the buffers we have in place through our funding and debt management strategy. The strength of our public finances coupled with the long weighted average maturity of our debt, means we expect to have relatively low borrowing requirements in the short to medium term.”
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Mr O’Connor said that at the end of 2024 general Government debt was at €218 billion – almost €20 billion below the post pandemic peak.
He said the ratio of debt to modified gross national income (GNI*) now stood at just below 70 per cent – down from about 160 per cent in 2012 and approximately 100 per cent in 2021.
He said Ireland was also benefiting from locking in low interest rates in previous years. He said debt interest cost €3.2 billion in 2024 which was almost 60 per cent lower than its peak over a decade ago.
“Sentiment towards Ireland is positive, as demonstrated by robust ongoing demand for our debt and a positive trend of upgrades from ratings agencies”, he said.
Mr O’Connor said the new Future Ireland Funds were set to have about €16 billion on their books between them by the end of the year.
