The Irish economy will experience a significant growth shock with up to 25,000 jobs impacted if the European Union fails to secure a trade deal with the US to limit the impact of tariffs, the Department of Finance has warned.
In its latest “annual progress report”, an annual filing required by the European Commission, the department warned of the “far-reaching” consequences for Ireland of the US’s increasingly erratic trade policy.
If the current 10 per cent tariff on US imports from the EU remains in place, growth in the domestic economy here is expected to slow to 2 per cent this year and 1.75 per cent in 2026.
This represents a cumulative downward revision to growth of 1.5 per cent over two years.
The department also warned there would be 25,000 fewer jobs created in the economy with the labour market growing at a slower rate than would have been the case in a non-tariff scenario.
Corporation tax for 2025 is also expected to be €2 billion lower than previously forecast (at €29 billion) even before the impact of tariffs with several firms signalling to Revenue they would be making lower payments this year.
The department did not model the likely impact of US tariffs on pharmaceuticals, which account for up to 50 per cent Ireland’s biggest exports to the US.
In February, the value of Irish exports to the US jumped by 210 per cent as multinationals stockpiled pharmaceuticals in the US ahead of Mr Trump’s tariff announcements.
The US president has vowed to reshore pharmaceutical manufacturing in a bid to correct the country’s hugh trade imbalance.
Even if the current 10 per cent tariff regime between Europe and the US is removed as part of a trade deal, the department’s report said growth in terms of modified domestic demand, a more accurate measure of domestic activity, would be half a percent lower than previous forecast at 2.5 per cent because of the current disruption to global trade.
“Given the elevated level of uncertainty, it is important to stress that our assessment published today is more akin to a scenario analysis; my officials will, of course, continue to monitor incoming data and developments and update numbers accordingly,” Minister for Finance Paschal Donohoe said.
“Even in the absence of any further changes in tariffs, there is evidence that firms and households are adopting a ‘wait-and-see’ approach,” he said.
“In other words, they are holding off on big-ticket purchases; this is also a feature in other economies,” Minister Donohoe said.
Separately the Department of Finance published exchequer returns data for April showing the Government has collected €28.6 billion in tax so far this year.
This was €3.8 billion (15.3 per cent) ahead of the same period last year.
April is not a key month for corporation tax and just €147 million was collected last month. The impact, if any, of tariffs on tax receipts here is not expected to be seen until later in the year.
