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Trump 2.0 is a step closer after Biden’s bumbling - and that would bring dire consequences for Ireland

Another Trump presidency would not be good news for the classic middlemen of a globalised world economy

Donald Trump's last term as US president did not cause as much economic disruption as many had anticipated. A second threatens to be very different. Photograph: Kenny Holston/The New York Times

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Cliff Taylor
Sat Jun 29 2024 - 07:00

Joe Biden’s bumbling debate performance has thrown the Democratic presidential campaign into chaos. Billed as a chance for the president to gain the upper hand, it has instead raised questions about his ability to hold office for another term. And it has brought into sharp focus the possibility of a Donald Trump presidency, which promises to be much more destructive economically than the first version. For Europe, and for Ireland, this is a prospect that needs to be considered seriously.

The dilemma facing the Democrats is acute. Replacing Biden at this stage would be messy and unpredictable in its consequences. Continuing to stick with him is hugely problematic. The stick-or-twist question is an enormous one for the party and for Biden himself. In the meantime, the Republican candidate can make hay.

Trump’s first presidency was long on rhetoric – notably on Twitter, now X – and ended in controversy as he refused to accept his defeat by Biden. But despite a trade dispute with China and his decision to withdraw from or ignore various multilateral organisations, the level of economic upheaval was less than had been anticipated. His big tax reform package was controversial in helping big business, but analysts argue its terms actually pushed up taxes in countries where US companies located overseas, such as Ireland. Certainly investment flowed to Ireland from the United States during his first term and has continued since – and corporate tax receipts here have soared.

Another Trump presidency looks more threatening, with an obvious determination of those around him to take control and push through a more radical agenda on the economy, immigration, abortion, international relations and beyond. The policies proposed in the economic sphere would be hugely disruptive and damaging. Ireland, as the European home for many big US companies and an economy based on international trade, is exposed here. It is impossible to quantify the extent of this. But the economic risk of Trump 2.0 is consequential for Ireland.

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Trade policy would be central. Trumponomics is based on economic nationalism and increased self-reliance, and a withdrawal from the globalisation trend of the past 50 years. He proposes an economic “decoupling” from China, with 60 per cent tariffs, or import taxes, on goods coming from that country, in effect pricing many of them out of the market. And Trump’s plans go further, also involving 10 per cent tariffs on all imports into the US. A trade war with China would be inevitable – and heightened tensions with Europe and other trading partners look very likely. The implications for Irish trade with one of our major trading partners would be serious, if Trump goes ahead with this plan.

Tariffs, contrary to the Trump doctrine, have a big economic cost, pushing up inflation, reducing choice and cutting growth. US analysts such as Moodys, the ratings agency, and the big investment banks warn that the American economy could quickly fall into recession. Trump’s immigration policy – and the threat to deport large numbers of people – would also cause big economic disruption.

A US recession and a turbulent world trade environment have obvious dangers for Ireland, where growth and tax revenues have been driven by exports and by the worldwide activities of American companies. Ireland’s progress has been as a trading base, profiting from the increased globalisation of trade. Trump’s policies, on the other hand, are a return to a kind of economic nationalism and a pulling-back from the era that has been of such benefit to Ireland.

The Biden presidency has already moved in this direction, particularly in relation to its China policy and new subsidies for investment in the US. But Trump would take it to a whole new level.

Tariffs and trade tensions between the US and Europe would raise questions about Irish exports to the US, including large trade in pharmaceutical, manufactured by US multinationals here and sold back to their home market. Huge investment and tax is on the line here. And Trump’s policy on corporate tax, where he has promised a further cut from the current US level of 21 per cent, also demands watching for Ireland.

And then there is China. The impact of US restrictions on the sale of advanced semiconductors to China was already evident in Irish trade figures last year, when a big fall in sales of semiconductors to that market resulted from the regulations, probably relating to Intel sales. Trump will only intensify these kind of questions: Apple, for example, even though it has diversified production in recent years, still arranges the manufacture of many of its iPhones in China in an international chain where Ireland is central. Links in the service sector are also significant and the implications of the US action on ByteDance, the parent of TikTok which has a significant Irish operation, have still to play out. The Chinese company has launched a legal challenge.

And at a wider level, will Ireland’s wooing of Chinese investment, and trade and diplomatic links with that country, be looked at critically by a Trump administration? This is already an issue under Biden, with limited understanding in Ireland of the extent of political feeling in the US towards China and the deep consideration across the political spectrum of what to do about it.

[ China’s view of the world puts Ireland between a rock and a hard place ]

As the world increasingly breaks down into competing blocs, there may be opportunities for Ireland as a long-time friend of the US, but there are also these serious questions and threats. The Irish strategy of being everyone’s friend may not be sustainable. Trump is a divisive and dividing force and his return to office as president of the world’s biggest economy would increase the risk of a damaging fracturing of the international economy into competing blocs, as well as raising big political questions for Europe.

For Ireland, the classic middlemen of a globalised world economy – a kind of high-tech Del Boy buying and selling from everybody – this would not be good news.

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