Minister for Finance Paschal Donohoe has warned that Ireland’s economic gains of the last few years could be at risk amid global economic uncertainty.
In early April, Donald Trump announced – and then walked back – a series of wide-ranging tariffs, which Donohoe calls “deeply regrettable.”
The uncertainty surrounding when exactly Europe will be hit by the tariffs has caused economic unease – this week, it was announced that the European Union will be hit with 50% tariffs in July, but even that it subject to change – and the Fine Gael Minister told the Seanad “it is important to underline the global environment we are in.”
“Recent developments in policies in that area represent a real shift away from economic integration,” he said.
The Dublin Central TD and Minister said, “there is growing evidence of fragmentation and change in the global economy along political lines, and there is a real risk to the gains we have made from cross-border trade and the greater flow of investment throughout the world.”
“As Ireland is a major beneficiary of those kinds of dynamics, our economy is exposed to the changes underway.”
Donohoe said the tariff era is “a lose-lose environment that could harm everybody.”
He said that Ireland’s economy is designed in such a way that it is “resilient” and relatively well-positioned to sustain an economic shock.
He told the Seanad that his Department has crunched the numbers and has presented a set of figures about what could happen to Ireland’s economic growth in the event tariffs are implemented and in a scenario where no tariffs are implemented.
“If we assumed there were no transatlantic tariffs in place, our economy will grow by approximately 2.5% this year and 2.75% next year,” he revealed, and that one of the scenarios is working on the basis that Trump’s original plan of 10% tariffs will stick.
However, the latest bombshell that Trump is looking to throw a 50% tariff on the European Union bloc presents “very real and serious” consequences for Ireland in the event the threat sticks.
“The potential impacts on the Irish economy from a change in world trade are evident. That is why the negotiations happening now are so important. It is crucial that we redouble our efforts to boost the competitiveness of our economy,” he said.
“Work is now underway in the government on this because it is clear that we live now in a world full of more uncertainty, and that uncertainty is creating a larger frequency for shocks.
Independent Senator Aubrey McCarthy said, “for Ireland as well as Europe, it is a hugely difficult time because we are a small, open economy and 80% of our output is destined for export. Millions of jobs across Europe and many in Ireland rely on the stable, rules-based economy the Minister talked about.”
“As a small, open economy I fully support what the Minister said about a measured response. We must resist the short-term provocations, which seem to be a threat and then they back down and we threaten again. It is all about diplomacy here.”
“History reminds us once again that, as Reagan said, protectionism will lead to higher consumer costs and job losses. The threat of a 50% tariff is not a negotiation tactic. It is like a grenade thrown into the room to get our attention. I agree with the Minister that we need to stand firm, not to be reactive, to be measured but not passive.”
Northside Senator Tom Clonan said, “I entered the workforce in 1987, almost 40 years ago, so I have lived through recession, boom, recession, catastrophic economic collapse and then boom and here we are, perhaps on the threshold of another period of economic instability.”
“It is true that during the Celtic Tiger we went off a cliff financially, but I do not believe that anybody intended this country to experience the economic and social collapse that it did. I think it was a case, if not of negligence, then misadventure. I prefer to think of it as misadventure. However, the austerity years were a deliberate, planned, programmed attempt to inflict pain and suffering on the most vulnerable people in our society.”
Clonan warned that the ghost of austerity still looms large over Ireland, and called on the government not to follow a similar path in the event of another economic downturn.
“Will the Minister give us an assurance that, notwithstanding any economic shocks that confront us, he will not impose further cuts, pain or austerity on disabled citizens? Will he commit to ring-fence the funding that is there for them and to assist and support them at a time of economic difficulty?”
The independent Senator said, “it is an absolute moral and ethical imperative, which I know the Minister shares, that we give disabled citizens economic rights. I ask him to give us an assurance or guarantee that he will protect and ring-fence the funding for disabled citizens, come what may.
Donohoe said he “totally disagreed” with Clonan’s charges that the government pursued austerity measures “with a deliberate intent to harm people.”
“Now that I have had the privilege to hold office, I am one of a small few who know what it is like for those who have gone before me with the many competing demands they faced.”
“When decisions were made that we now know in retrospect were not right for the long term, I am certain that as those people were making those decisions, they did not do so with a view to causing any harm in the future, let alone at the time they were making them.”
“The very best of intentions can still lead to terrible outcomes in the long run; the great responsibility we all have is to try to get that balance right.”
Speaking after Trump’s initial tarriff announcement in April – which initially set tariffs against Europe at 20%, before being set back to 10% and now possibly going up to 50% – Donohoe said “the new normal’ will most likely be very different from what we have been used to for many years.”