By Dan Mulhall, former Irish Ambassador to Washington
Friday, January 31st, 2025
Diplomats know that governments come and go, and are canny enough to maintain contacts on both sides of America’s political aisle.
As a former ambassador to the US, I believe we need to be prudent and pragmatic about how we handle the challenges ahead. Trump is not everyone’s idea of what a US president should be, but he has been convincingly elected and that ushers in new realities we cannot ignore.
Instead of catastrophising, we need to look coolly at what these changes could mean for the Irish economy
People are right to pay close attention to Trump’s comments on the economy. He won the election with a clear commitment to support American manufacturing. He campaigned to impose tariffs on trading partners, and cut the US corporate tax rate. Both policies could be sticky for Ireland.
Instead of catastrophising, we need to look coolly at what these changes could mean for the Irish economy, in the context of the deep, mutually-beneficial interlinkages between the Irish and US economies.
For a start, the new president can only really count on the Republicans having complete control of Congress for the next two years, ahead of the midterm elections. He is likely, therefore, to frontload significant elements of his agenda in the first two years, particularly those which require Congressional authorisation.
You might think cutting the US corporate tax rate would be ripe for swift action, but the administration will need to consider the impact that such a sudden move would have on the US economy.
Cutting the US corporation tax rate to 15pc may actually be a more medium-to-longer-term objective given the scale of revenues involved and the potential implications for the overall US budget, especially as the president may want to prioritise other tax reductions.
The more immediate threat to Irish interests seems likely from tariffs, which Trump has described as “the most beautiful word in the dictionary”. As president he has considerable power to impose tariffs without seeking Congress’s approval.
March 31 could become a flashpoint for trade tensions between the EU and the US, when a temporary agreement to suspend tariffs on EU steel and aluminium exports and some US goods comes to an end. That could see a damaging reinstatement of tariffs and escalate into an EU-US tariff war.
A new tariff dispute with the EU could see Trump respond with a tit-for-tat escalation, with potentially serious consequences for both the US and the EU. This is in no one’s interests. I am sure the EU Commission has some proposals up its sleeve for such a scenario.