Tariffs, tax and trade war: A Trump presidency would be a bumpy ride for the Irish economy

There has been plenty of discussion about the extreme policies put forward by Donald Trump in his bid to win next week’s election. And lots of talk about what he actually intends to do. But there is another vital factor. What could Trump actually do if he is returned to the White House, given the constraints imposed by Congress and the courts?
And while the answers about how far presidential power can be pushed are complicated, one thing is clear. A Trump win means unpredictability and uncertainty, a potentially prolonged period when everyone tries to work out what happens next and what it means. Chaos in some policy areas is entirely possible, and big policy shifts in others. And for Ireland, with its economic interests so closely entwined with the US, this is important and potentially dangerous.
If Trump wins, much will then depend on what happens in the Congressional elections in which all the seats in the House of Representatives are up for grabs, as are a third of the seats in the Senate, currently – by a wafer-thin margin – under Democratic control. A Republican sweep, leaving it in charge of the White House and Congress, would clear the way for Trump, notably in the area of tax but also trade, as well as his wider policy agenda, including his dismissal of the vital green agenda.
Trump wants to slash the US corporation tax rate from 21 per cent to 15 per cent, a consequential issue for Ireland as it threatens to match the rate now applying to big US companies here and to lessen the attractiveness of one of the Irish selling points to investors. Trump also wants to renew his 2017 tax cuts, some of which expire next year, and exempt social security payments and tips from income tax.
As well as the balance in Congress, the state of the US public finances could be a barrier here, as the Trump agenda would push up federal borrowing and the national debt. Add to this the former president’s substantial, if still rather vague, threats to undermine the independent role of the Federal Reserve Board – the US central bank- in setting US interest rates, and you have fiscal and monetary uncertainty that could unsettle investors in US government debt and take a wider economic toll.
And then there are tariffs. While US corporate tax changes and the wider health of its economy are important to Ireland, trade policy is where the immediate threat lies. Trump’s headline promise is to introduce a 60 per cent tariff on imports from China and 10-20 per cent on imports from elsewhere. Some believe this is a negotiating tactic, but Trump’s claims that the US was being taken advantage of by other countries on trade has been central to his election campaign. He has to deliver something here.
If the Republicans control Congress, the way would be clear. If not, the tariff threat remains. Last time he was in the White House, Trump relied on a range of legislation – relating to national security and unfair trade, for example – to bypass Congress and allow him to impose tariffs on Chinese imports and on steel and aluminium coming from Europe and elsewhere. Expert opinion is divided on whether he could use the same legal cover to apply much wider tariffs this time – and how the courts might respond to any challenge. But aggressive moves on tariffs look entirely possible, even if the detail is unpredictable.
This would hurt the United States most, pushing up the price of imports, though that does not seem to matter in Trump’s worldview, despite the role of inflation in the disquiet evident among US voters. The respected Peterson Institute said that the cost to each household of a full-scale tariff plan could be as much as €2,600 a year. Other studies have suggested that some other countries, including in Europe, could benefit if trade is diverted. But it is very difficult to game-plan how other countries would react, with EU sources suggesting they would hit back “fast and hard” in a trade war with Trump.
For Ireland, a small country that has acted as a kind of aircraft carrier for the international operations of US firms, the general hit to global trade and investment that would result from a trade war would carry dangers. And the detail of any tariffs would also be vital.
Trump has promised to hit firms producing overseas for US markets. Does this mean tariffs would apply to American pharma firms in Ireland that export billions each year back to the US market, accounting for a huge chunk of Irish exports and a lot of tax revenue? Or will Trump’s billionaire business backers step in to limit the damage? This is one to watch for Ireland.
Trump’s threat to deport illegal immigrants on a grand scale – relying on legislation dating back more than 200 years – is another leg of the chaos he promises to unleash. There are legal questions here and practical ones too about the ability of the US system to implement such a plan – or the willingness to do so in Democratic states. But as well as sowing division and spreading fear across immigrant communities – vice-presidential candidate JD Vance has spoken about “starting” with a million deportations – this would also disrupt the US jobs market and the economy.
It would be a mistake to take Trump’s often chaotic and contradictory rhetoric too literally, but the intended direction of travel is very clear. And it is potentially damaging for the world economy and the US – and for countries such as Ireland that have a big stake in the health of international trade and America’s role in it.
There have already been clear signs in recent years of a pullback from the international spread of economic activity that has been a key factor in Ireland’s economic success – and this has intensified after the Russian invasion of Ukraine. Politics and economics have become intertwined as countries try to use their economic power for political ends: for example limiting Chinese access to advanced microchips vital to industry and national defence. This trend to economic nationalism raises questions for Ireland, which is used to playing all sides for both investment and trade.
Trump 2.0, if it happens, would put this shift away from globalisation on steroids, as well as trying to weaponise uncertainty. It would be a bumpy ride.