Brexit has cost Britain. Big time. But if Donald Trump gets into the White House, he is promising to introduce policies that will have a similar impact by cutting America’s trade with the rest of the world – and targeting China in particular. Just as the Brexiteers promised that leaving the EU would allow the UK to “take back control”, Trump will try to sell a similar message to the US electorate, majoring on issues such as immigration and the economy and trying to tap the same well of uneasiness and dissatisfaction that led to the Brexit vote.
This has significant implications for Ireland, which has an economic strategy based on an open world trade system and, in particular, on the ability of US companies to sell freely from Irish bases across the world, including back to the United States itself. That is a key reason why Leo Varadkar is in the White House this weekend – and why Ireland has a real interest in who will be there to meet the Taoiseach next year.
What Trump would actually do in office, of course, will be another matter. Big business will be lobbying hard. The reality may not match the rhetoric. Fears of a stock market collapse when he was elected in 2016 and some dramatic policy upheavals proved largely unfounded, though he did set off a trade war with China. But, as it turned out, Trump’s major tax reform changes were to Ireland’s advantage. Irish food and drink exports were threatened – and some were affected – as part of a trade row between Trump and the EU over subsidies paid to Airbus. But a surge in US investment into Ireland – in both physical assets and in tax-driven moves on intellectual property – kicked off when Trump was last in the White House. The fears of chaos proved unfounded.
However Trump 2.0 could well be a more extreme presidency. Ireland is unlikely to get lucky a second-time around. The theme that Trump and his senior supporters have been selling is of the US reducing its international trading links and producing more for itself, a kind of economic autarky, or self-reliance, that textbook theory – and Brexit Britain – would teach us has an economic cost. Central to Trump’s plan is a universal tariff – or tax – on imports into the US. The details have not been spelled out, though Trump has thrown out a possible tariff figure of 10 per cent that would be more than enough to have a substantial impact. It would mean companies exporting from Ireland to the US would either have to accept lower profit margins, not always economic, or seek higher prices from US consumers – not always possible.
What could Trump actually do if he wins - and what would this mean for Ireland?
Simon Harris has identified the right problem, but a department of infrastructure is the wrong solution
The €500,000 suburban three-bed is now the house at the centre of the property price surge
The €40 million pre-election gimmick no one asked for and even fewer need
The US accounts for around 27.5 per cent of Irish goods exports, the vast bulk of which are in the pharmaceutical and biomedical sectors. Already US commentary has questioned why Ireland gets the jobs and tax revenue from the production of drugs for US consumers. Trump has pledged to bring the production of essential medicines back to the US, though emphasising the elimination of purchases from India and China, as opposed to Ireland. The US is important for Irish food and drink exporters, who would also be vulnerable to trade measures.
The imposition of wholesale tariffs would run counter to the rules of the World Trade Organisation. Whether Trump – who might withdraw from the WTO in any case – would care is another matter. And, unlike where taxes are concerned, the US president has room to act independently of Congress on trade policy, though to what extent is a matter of debate. It would also be likely to set off an international trade war with unpredictable consequences.
Tensions on international tax plans affecting major US digital players could be added to this dangerous mix. These companies operate in the other big area of international trade, which is services. Here, the US House of Congress vote this week for a new law to force TikTok’s Chinese owner ByteDance to sell control of the company or lose access to the US market is notable. Mike Gallagher, a Wisconsin republican who co-authored the bill, which still needs to go through the Senate and be signed by the president to become law, said the US could not “take the risk of having a dominant news platform in United States controlled or owned by a company that is beholden to the Chinese Communist Party”.
It remains to be seen how this all plays out and what the implications are for TikTok’s 3,000 employees in Ireland, already facing some cuts from a restructuring programme. While tariffs – and perhaps taxes – are the weapons of choice for goods, tensions in services are more likely to come from regulation, with the EU stepping up its oversight of big US firms under the new Digital Services Act. How this evolves over time and how the US responds has implications for the US service companies like Google, Meta and LinkedIn and their operations here.
And the TikTok affair shows how Ireland is likely to be affected by disputes between the US and China. These may escalate even if Biden wins in November – already Irish computer chip exports from American multinational subsidiaries here to China have been affected by new US rules restricting sales in this area. But tensions will rise further if Trump prevails. He has promised a four-year plan to phase out all Chinese imports of essential products and severe restrictions on investment by US companies there. Again, the reality may be less dramatic, but as a country plugged into global supply chains organised by companies like Apple – whose iPhones are mostly made in China – a “decoupling” of the US and China could be disruptive economically.
It could also raise political issues. Ireland currently rides two horses, with the Taoiseach going to the White House for St Patrick’s week and the Minister for Finance Michael McGrath going to Beijing and Shanghai. As one long-time observer of the foreign investment scene put it, what happens if Ireland is forced to choose between maintaining strong relations with the US, the country where most of its foreign investment comes from, or China, likely to be the fastest-growing market in the longer term? The choice may not end up being quite so binary. But for a country like Ireland, whose good economic fortunes have been based on globalisation, Trump would set a match under smouldering international tensions, with unpredictable consequences.