The Government is not in a position where it has to contemplate cutting back State spending in response to the likely economic shock of US tariffs on trade, Minister for Public Expenditure Jack Chambers has said.
US president Donald Trump is set to announce sweeping tariffs on trade coming from Europe and elsewhere next week, a move expected to hit Ireland hard.
The European Union (EU) needed to be careful in how it responded to prevent worsening the trade dispute, Mr Chambers said.
The Government is trying to “game” the various different scenarios that could play out, and as a result will have to “carefully manage” any increase in public spending, he said. “We’re not in a position of having to make specific cuts to public expenditure.”
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Taoiseach Micheál Martin on Friday said “engagement is key” to dealing with the imposition of US tariffs.
The US president has already announced tariffs, which are effectively taxes on imports, including steel and aluminium products, and all foreign-made cars and trucks.
Mr Trump is due to follow up with much broader measures on April 2nd, which may include tariffs on pharmaceutical imports into the US. He has frequently spoken about wanting to use tariffs to pressure US pharmaceutical companies, to move manufacturing jobs created in Ireland back to the US.
Speaking in Brussels on Friday, Mr Chambers said the Government is “war gaming” the potential impacts of US tariffs.
Similar to Britain’s decision to leave the EU, the full impact of the trade disruption may not become clear “immediately”, he said.
The European Commission, the EU’s executive body that proposes laws and sets the bloc’s trade policy, has been drawing up a list of US products and industries to hit with retaliatory tariffs.
Many EU states have spent recent weeks lobbying the commission, to try to avoid drawing certain sectors important to their domestic economies, into what may become a trade war.
Irish officials are having “extensive engagement” with the commission about the tariff plans, Mr Chambers said.
“We need to be careful about retaliatory and tit-for-tat measures, which could worsen a trade dispute ... Ireland is reflecting that input in the context of engagements and deliberations with the commission,” Mr Chambers said.
The Government has been making representations about the “concentrated risk” Ireland faced, when it comes to the pharma and tech sector, he said. Ireland is the member state “most exposed and the most at risk” to an EU-US trade war, he said.
Beyond the immediate shock to the flow of transatlantic trade, the “uncertainty” brought into companies’ boardrooms could mean they did not invest in Ireland over the coming years, he said.
[ Ireland and Trump’s tariffs: From pharma to booze – how will our prices, jobs and economy be hit? ]
With almost 40 per cent of pharma exports in Ireland going to the US, with an estimated value close to €60 billion in 2024, the Taoiseach on Friday described president Trump’s tariff threats as “very serious”.
Speaking in Limerick on Friday ahead of the inaugural meeting of the Limerick Mayoral and Government Consultative Forum, Mr Martin warned that pharmaceutical tariffs, in particular, would lead to “high inflation and higher prices for medicines for consumers, and will damage the economic prospects for the companies insofar as they’ve embedded very substantial funding in plants in Ireland”.
Meanwhile, projects like Metrolink “need to continue” even if there is an economic shock caused by an EU-US trade war, according to Minister for Transport Darragh O’Brien.
He also said he does not foresee a situation where capital investment in the soon-to-be updated National Development Plan (NDP) “would be impacted by the current geopolitical situation”.
Mr O’Brien was speaking as he announced €633 million in funding for national roads this year, an increase of €92 million on the sums provided in 2024.
Projects to be progressed with the funds include the Adare Bypass, the M28 Cork to Ringaskiddy road and the N6 Galway City Ring Road.
The old Metro North project was shelved amid the fallout of the last economic crisis.
A successor project, Metrolink, which would link Swords in north Dublin to the city centre via Dublin Airport is in the planning stage.
A recent Departmental briefing paper for Mr O’Brien said the project should could between €7.16 billion and €12.25 billion but, should there be planning difficulties, this could rise to as much as €23.4 billion.
Mr O’Brien said the cost benefit analysis “stacks up so well” and said Metrolink “will pay for itself over a sustained period of time.”
