Why Ireland should be worried about Trump 2.0

Donald Trump's return to the White House has many significant economic implications for Ireland. And none of them are positive.

This country is home to substantial overseas operations for corporate giants such as Apple, Google, Meta which owns Facebook, Microsoft, Intel and Pfizer.

For the Irish economy, the multinational sector is the goose that has been delivering the golden egg year after year.

Taxes paid by US corporates have been soaring, making Ireland a much wealthier country than it would be without them.

It has also given the Government the ability to increase spending.

Economic observers have been acutely aware that Ireland's reliance on multinationals poses a significant vulnerability.

In a recent assessment, the Irish Fiscal Advisory Council said the amount of corporation tax being collected is "exceptional".

Corporation tax receipts from multinationals "have more than doubled in three years and are incredibly concentrated", it said.

"Just three companies account for 43% of all corporation tax - €10 billion of the total €23 billion collected in 2022," noted the fiscal watchdog.

In other words, if even one or two big players pulled out it would have a huge impact on Ireland's public finances.

Many multinational companies have been attracted by Ireland's 15% corporation tax rate, which compares favourably with the US rate of 21%.

Donald Trump wants more big corporations to return to America and has proposed cutting the US corporation tax from 21% to 15%.

That would effectively wipe out Ireland's tax advantage.

But such a change in tax law would cost the US significantly in terms of lost tax revenue. It would also require approval by the House of Representatives and the Senate.

The outcome of the US Election would seem to make the job of getting such a move approved much easier as Republicans now control the Senate, while counting is continuing for the House of Representatives.

As we learned from Donald Trump's previous presidency, there can be a chasm between what he says and what happens.

But it's thought that he learned from some of his mistakes during his last term in office and will be more organised this time around.

Even if he does cut corporation tax, it is not a given that companies will automatically up and leave.

Many multinationals have large-scale investments in Ireland and won't want to turn their backs on high-end manufacturing facilities built up over decades.

Donald Trump's threat to impose tariffs also has implications.

This would be a tax on imports into the States. In effect, it is another way of pushing American multinationals to relocate back home.

He has proposed tariffs of up 20% on all imports to the US, apart from Chinese goods, for which he has singled out for a special tariff of up to 60%.

Unlike the corporation tax cut, Donald Trump would not require Congressional approval for this measure.

Before the result of the election was known, Minister for Finance Jack Chambers said yesterday "we are always cognisant of geopolitical risks in how we manage the Irish economy".

Outwardly the Irish establishment will be quietly polite about Donald Trump's return to office but behind closed doors there will be concern.