Impending US tariffs put up to 80,000 jobs and future tax cuts at risk, warns finance minister
Finance minister Paschal Donohoe warned that, in the event of an economic shock, the Government would not be in a position to protect incomes in the same way as had been done in the pandemic.
Up to 80,000 jobs and future tax cuts are at risk if the US imposes tariffs on the EU in the next 10 days, the finance minister has warned.
The Trump administration and the EU have plans to each slap tariffs on goods from next Wednesday, a situation which Paschal Donohoe warned on Sunday could lead to significant impacts on the Irish economy.
Models from the Department of Finance and the Economic and Social Research Institute (ESRI) have shown that a trade war between the US and EU could lead to tens of billions lost to the Irish economy, with Mr Donohoe adding that jobs and future tax plans could also be impacted.
Mr Donohoe said it is “very possible” that between 50,000 and 80,000 jobs, that would have otherwise been created or kept in the economy in that period under previous projections, would be affected over the next five years.
The programme for government commits to “progressive changes in taxation if the economy remains strong, including indexing credits and bands to prevent an increase in the real burden of income tax”, but says that the Government would postpone changes to income tax credits or bands “in the event of an economic downturn and unexpected deterioration in the public finances”.
Asked about this on RTÉ radio on Sunday, Mr Donohoe said that cutting taxes amid an economic shock would not be the right thing to do.
“In all of the scenarios that are in front of me at the moment, I would say that our focus will be in continuing to increase our rate of capital investment within our economy.
“However, there will be other choices that we will have to make. Those choices could mean current spending not growing at the pace we were anticipating.
"It could also mean we have to make changes in relation to taxation, because we have to prioritise the keeping of jobs and retention of the competitiveness of our economy.”
Mr Donohoe warned that, in the event of an economic shock, the Government would not be in a position to protect incomes in the same way as had been done in the pandemic.
"While we would want to offer support and be of help, what we won't be able to do is bring in the kind of economy-wide pandemic support that were in place in the past. We will need to keep safety in our public finances and preserve our economy over the medium term."
The warnings come after ministers were last week updated on the work of a cross-government departmental group working on the issue. It is understood that that update warned of significant potential impacts.
On Friday, Tánaiste and minister for foreign affairs and trade Simon Harris held the second meeting of a trade forum he has convened in response to Mr Trump's plans.
That forum was told that early April could be "a moment of significant disruption, and the magnitude of the impact on growth will depend on the scale of measures taken".
Stakeholders were told that there is "enormous volatility at this exceptional period" and that "national competitiveness has never been more important".
On Friday, an ESRI/Department of Finance report said that reciprocal ‘tit-for-tat’ tariffs could lead to the levels of GDP falling by as much as 3.5% — more than €17bn — over the next five to seven years, particularly damaging the export sector.
The EU last week delayed a proposed 50% tariff on American whiskey until mid-April, aligning the bloc with broader countermeasures against US steel and aluminum duties.
The shift in the timing of the levy, originally set to take effect April 1, allows for more talks with US officials, a spokesperson for the European Commission said.
