EU tariff response to US may be 'inevitable', finance minister warns
Finance minister Paschal Donohoe. Picture: Cillian Sherlock/PA
US tariffs on alcohol from the EU will have a “disproportionate effect on the Irish economy”, finance minister Paschal Donohoe has warned but “regrettably we could get to a place where a tariff response from the EU does become needed and even inevitable”.
Mr Donohoe was speaking following the warning by the Economic and Social Research Institute (ESRI) that a full trade war with the US could severely hurt the Irish economy
The ESRI said reciprocal ‘tit-for-tat’ tariffs could stifle the domestic economy leaving modified domestic demand — the preferred measure of domestic economic growth — 1% to 2% below a no-tariff base level after five years depending on the extent of the tariffs.
The potential impact on GDP could be 2.5% to 4% below a no-tariff baseline. Tariffs are also expected to be detrimental to job growth, the traded sector, and the prospect of future foreign direct investment.
US president Donald Trump has said he will announce a raft of tariffs on the EU on April 2 which could be as high as 25%.
Speaking on how the EU is going to respond to Mr Trump’s tariffs, Mr Donohoe said there are going to be different views between EU states and “there are some parts of the European economy that will matter more to individual national economies than they will matter to other national economies”.
“I do expect there will be discussion and debate in relation to it but I also do believe we’ll reach a common view on these issues within the EU.”
On Thursday, the EU announced it would delay its first counter tariffs against the US until the middle of April to give room for negotiations. The EU Commission had proposed re-imposing 2018 tariffs on €4.5bn of US products on April 1, followed by hitting a further €18bn US goods on April 13.
The first set of counter-measures includes a 50% tariff on US bourbon. However US president Donald Trump threatened to slap a 200% tariff on all alcohol products coming into the US from the EU in response to this measure.
On the prospect of Irish alcohol being subject to tariffs, Mr Donohoe said he recognised it could have a “disproportionate effect on the Irish economy” and “we are engaging with the EU and America to try to avoid getting to this place in the first place”.
“I absolutely understand the concern that those in the food and drink sector have in Ireland… Unfortunately, because of the scale of trade dispute that could be created by the decision that has been made to apply tariffs in the first place, it does mean that many different sectors in many different economies are going to be hurt, and we’re trying to mitigate that hurt and avoid it happening,” Mr Donohoe said.
He said the Government recognises that “regrettably we could get to a place that a tariff response from the European Union does become needed and even inevitable”.
When asked how the tariffs might impact the budget later this year, Mr Donohoe said it will “very hard to make longer term predictions” on the economy but the budget will seek to support the enterprise economy as well as competitiveness.
