Earlier this month, while Tánaiste Simon Harris was on a call with EU trade commissioner Maroš Šefčovič, US president Donald Trump announced that he would hike tariffs on Canada.
Days later, officials in the Department of Foreign Affairs were in conclave, only to be interrupted by news via Trump’s Truth Social account that he was planning to impose a 200 per cent tariff on alcohol exports from the European Union.
In real time, interventions from the Oval Office changed the facts on the ground. This is the reality of trying to make policy during the second Trump presidency, where the only constant is unpredictability.
As Ireland tries to plan for what appears to be an inevitable trade conflict between the US and the EU, uncertainty abounds – as do threats. With days ticking down to April 2nd, when Trump has promised to unveil details of “reciprocal” tariffs levied on trading partners, Irish politicians, businesses and policymakers are asking themselves: how do you plan for this type of trade war – and how do you survive it?
Official Ireland started the week buoyant following the St Patrick’s Day diplomatic offensive. Sources across the public and private sector were ebullient that Taoiseach Micheál Martin avoided an Oval Office savaging and at the warmth of the reception for the Irish delegation.
One senior figure involved in the Irish effort spoke of “palpable relief” at a function held in Blair House, the presidential guest house opposite the White House where Martin stayed, after the Taoiseach’s meeting with Trump. The grudging admiration expressed by Trump for Ireland’s success in attracting US companies was notched as a win – “game recognising game”, this person surmised.
What do Donald Trump’s April tariffs mean for Ireland?
Trumpian politics can hinge on personal connections or affinity – hence the satisfaction with Martin’s encounter. This is not lost on the several Irish sources who made the same point this week, with one suggesting that US aggression towards Canada has been informed by Trump’s animosity towards former prime minister Justin Trudeau.
“It does matter and those messages do resonate with key leaders in business and political worlds,” said Paul Sweetman, chief executive of the American Chamber of Commerce Ireland in assessment.
And yet, for all the Trump encounter could have gone worse, there is no sense that his administration is going to back down from its intended tariff offensive – nor that the EU will blink. If hit with tariffs, it has a list of €26 billion in products to tariff in return – plus much more in reserve.
Martin has urged calm, and the EU will pause to draw breath before responding – announcing a two-week delay in its response plans for next month on Thursday – but the abiding sense for some is that wheels are in motion in Brussels as well as in Washington.
“We can influence the EU, but the EU has decided it doesn’t trust the Americans any more and is prepared to take quite drastic steps,” says one executive in a multinational firm operating in Ireland.
There is also a belief that the Trump administration is indifferent to the idea of defusing tensions through talks before tariffs. The hope that an off-ramp can be found is fading.
On Wednesday, Harris told Fine Gael TDs and Senators that the US was unlikely to engage with the EU in any intensive way until after April 2nd. The working assumption, according to people familiar with discussions, had been that Trump would use the threat of tariffs to get people around the table. Ireland has urged dialogue and the need to avoid a tit-for-tat trade war. That remains the Government’s position, but as to the likelihood of that outcome, “the thinking has shifted”, says one source.
All of this suggests some degree of economic pain is inbound. Quite how much is a matter for debate. Andrew Webb, chief economist with Grant Thornton, judged that it is an “exceptionally difficult, exceptionally fearful time in terms of the rhetoric around tariffs and what it could mean for different parts of the economy.”
In Brussels on Thursday, Minister for Finance Paschal Donohoe was blunt in his assessment: “It would be bad for jobs, it would be bad for growth, and it could be bad for inflation.”
Donohoe suggested the deeper problem was the erosion of international and globalised trade norms upon which the Irish economic model is built. Confidence ebbing away from “the basic rules regarding how countries engage with each other” could be “very corrosive”, he said.
[ US tariffs could cost Irish economy more than €18bn in lost tradeOpens in new window ]
Research jointly published on Friday by his department and the Economic and Social Research Institute (ESRI) starkly laid out the potential consequences for Ireland: GDP falling 3.5 per cent relative to a no-tariff scenario, a significant hit to production in the traded sector, and shrinking domestic demand. This would amount to a cost of €18 billion in lost trade and a long-term risk to the public finances.
“When you’re the most open trading economy,” one Cabinet source reasoned this week, “it does have a big effect.”
Behind the scenes, officials have been working since before the Irish general election on a wide array of scenarios. People briefed on the plans say hundreds of civil servants have been mobilised. In addition to external structures – a trade forum composed of Irish business leaders, and the US-based Strategic Economic Advisory Panel – all Government departments have been feeding information into the EU policy co-ordination division in the Department of Foreign Affairs.
It’s like driving a car through a river and we don’t know how deep it is
— A source on trying to anticipate the Trump White House
The Department of the Taoiseach is taking a key role in co-ordinating, with the Department of Finance also prominent, alongside the Department of Enterprise, Trade and Employment. It is by now a well-worn playbook with its roots in Brexit.
The aim, sources say, is for the “system” to understand where the impacts may fall, both directly and indirectly. A second goal is to communicate Irish messages at a political and official level to the EU, with a third aim being to prepare responses.
The difficulty in all this is, again, the uncertainty. Some insight can be gleaned from Trump’s public pronouncements, which have set off jitters in the drinks industry in particular given the large tariffs it is facing, but multiple Irish sources expressed the belief that even people in Trump’s direct orbit don’t know what he’s going to do next.
“It’s like driving a car through a river and we don’t know how deep it is,” says one person involved in planning.
Some consideration is being given to convening a group composed of Martin, Harris, Donohoe and Minister for Public Expenditure Jack Chambers to give political leadership to the response – something that was initially mooted during the programme for government negotiations as a general economic clearing house.
[ EU-US trade war would hit job growth and cut living standards, Donohoe warnsOpens in new window ]
Meanwhile, away from Dublin, efforts are ongoing to map Trumpworld and to build a picture of how the administration operates – who has the US president’s ear, and how does the White House think about Ireland. Such efforts were part of meetings Harris had with leading US investment banks JP Morgan Chase and Goldman Sachs in New York last week, although even these firms have more limited insight than might otherwise be the case.
There are early-stage discussions about what supports, if any, might be made available to Irish firms. The clear intention, at this stage, is that any State assistance would be more in line with those offered during Brexit, rather than more recent and large deployments of State cash.
“It’s not Covid,” is the blunt assessment of one figure. A second agrees: “There’s a strong belief we shouldn’t be entering into that space.”
Companies with particular exposure might be offered resources to move toward new markets, and some balance sheet support, but it would be of a markedly different order.
Early thought is also being given to how the Government would manage any hit to the exchequer by way of, for example, a slowing in corporation tax revenues.
“If the worst element of this causes a revenue impact or shock, then that necessitates a response,” says one senior Minister.
In line with the programme for government, investment in capital spending and protecting services are seen as paramount, but planned tax cuts could be endangered.
“Further narrowing of the tax base would be unwise if there’s uncertainty on revenue,” says the same Minister.
On the verge of a seemingly unprecedented trade disruption, there is an abundance of theories and countertheories about what is to come. But nobody is certain what will happen – or how damaging it could be.
Dealing with the Trump White House, the only constant is unpredictability.
