Minister Donohoe notes the publication of analysis estimating the impact of tariffs on the Irish economy
- Foilsithe: 21 Márta 2025
- An t-eolas is déanaí: 12 Aibreán 2025
- in the event of tariffs being introduced on transatlantic trade, Modified Domestic Demand in Ireland could fall by 1-2 per cent – relative to a no-tariff baseline – over the medium-term
- such a decline could trigger lower employment – again relative to baseline – over the medium-term
- the actual impact on both output and employment would depend on the scale and scope of any tariffs introduced
Trade policy uncertainty is exceptionally high, with the prospect of tariffs – taxes on imports – being imposed on transatlantic trade.
To better understand the potential impact of tariffs on the Irish economy, the Department of Finance and Economic and Social Research Institute have undertaken an economic analysis, the results of which are being published today.
Given uncertainty around the scale and scope of any tariffs, several scenarios are modelled. In a scenario in which 10 per cent tariffs are introduced bilaterally on the trade of goods between the US and the rest of the world, Modified Domestic Demand (MDD) in Ireland would be just over 1 per cent below its no-tariff baseline level after 5 years. In a scenario in which 25 per cent bilateral tariffs are introduced on all goods and services trade between the US and the European Union, MDD in Ireland would be close to 2 per cent lower after 5 years.
Importantly, the paper does not account for changes to the firm and sector-specific factors that have produced windfall corporation tax receipts in recent years. As a result, the impact of an escalation in protectionism on the public finances may be higher than is estimated in the paper.
Commenting on the publication, the Minister for Finance Paschal Donohoe said:
“There is clearly unprecedented levels of uncertainty regarding the global trade architecture and we cannot rule out the possibility of tariffs on transatlantic trade being introduced.
“Government must, of course, plan for all eventualities, and the work being published today by my department and the ESRI provides one piece of the analytical jig-saw needed to chart a way forward.
“Ireland has been a massive beneficiary of globalisation and we remain a strong advocate of free-trade policies. Ireland and the US enjoy a mutually beneficial, two-way economic relationship.
“Government will continue to work to improve the enterprise climate in Ireland, including by ramping-up capital spending in key strategic areas, including energy, water, transport and housing. This is how we will remain competitive against a backdrop of heightened uncertainty.”