Future tax cuts at risk as US tariffs threaten Irish economy, says finance minister
Paschal Donohoe has warned of the adverse impacts of US tariffs, which US President Donald Trump is due to unveil on Wednesday. Picture: Stephen Collins/Collins Photos
Future income tax cuts may be delayed due to the threat of US tariffs on the Irish economy, the finance minister has said.
Paschal Donohoe has warned of the adverse impacts of US tariffs, which US President Donald Trump is due to unveil on Wednesday.
It is expected that 20% tariffs will be introduced on most goods imported into the United States, with Mr Trump describing Wednesday as “Liberation Day.” The finance minister said that tax cuts introduced by the previous coalition were still affordable, but that further tax reductions may need to be assessed in the context of October’s budget.
“Minister [Jack] Chambers and I will do that together and neither of us will want to make any decision in relation to either spending or taxation that might mean the difficulties that we face in the years ahead could be more complex or go on for longer,” Mr Donohoe said.
Mr Donohoe did not rule out future income tax increases but said that it was more likely for the Government to bring in tax cuts at a “later point or over time.”
“But I’d have to stress that we need to understand what the tariffs will be, to what degree they will be permanent and what the EU response will be. We will only begin to become clear on that tomorrow,” Mr Donohoe said.
He added that capital spending would be prioritised, and that the Government would protect taxes coming into the country if there are changes in the amount of corporation tax being collected.
Despite this, Mr Donohoe said that the Government is approaching the threat of US tariffs with a significant budget surplus, and this would be of “great help” in future decisions.
Asked if the public should be prepared for a recession, Mr Donohoe said that it is “difficult to identify” the scenario Ireland is heading into after tariffs are announced tomorrow.
There is still uncertainty regarding the scale of tariffs, whether they may be permanent, and if there will be further measures taken by the US administration, Mr Donohoe said.
“So all I, in truth, can say t the moment is on the basis of what President Trump has already said.
“I do believe it is very likely that we will experience an economic challenge in the next number of years, but on the basis of what I currently know, I believe it’s most likely that will lead to a lower level of economic growth, with a risk in relation to how many new jobs could be created or some lost, and that will happen over the next two to four years.
Mr Donohoe said that once the tariffs are unveiled, he would be better able to indicate what the impact on Ireland will be.
