By Kevin McLoughlin
Since his inauguration, there has been a deluge of decrees from Trump. People are particularly concerned about the consequences of Trump’s new tariffs. Some are delayed, but others have been imposed, and it is already having a real impact.
It should be noted that he and other hard-right players like Tucker Carlson are directly intervening to stir up fascistic activity here by their very conscious elevation of Conor McGregor.
Indigenous industry hit
Forty per cent of all Irish whiskey exports go to the US and some production has been paused at Irish Distillers, who employ over 800. There is also uncertainty at Kerrygold (Ornua), which employs nearly 4,000. The Government’s plan, which was wholly insufficient in any case, to bring the “minimum wage” up to the “living wage” level has been ditched, and many people’s pensions have tanked due to the stocks and equity instability, both linked to the chaos Trump has caused.
Trump’s tariffs, but also his plan to cut US corporate tax, are a frontal attack on the model of capitalist development that the ruling class here has operated for nearly 70 years. Namely, this is to rely on foreign direct investment (FDI), increasingly from the US, to develop the economy and deliver tax revenue.
They hoped a menu of perks, including low taxes, would entice foreign capital to Ireland and that this would have a knock-on impact through economic ‘linkages,’ resulting in the development of the domestic economy. It hasn’t worked, as the domestic Irish economy remains weak, despite the surge in FDI from the early 1990s.
While enormous wealth was made off the backs of Irish workers, not enough of it stayed here due to low corporate tax rates and other factors, with which to fund decent public services. This model has been a key reason why we have consistently had only third-rate public services and infrastructure compared to those in the rest of Europe.
Corporate loopholes are closing
Ironically, the low corporate tax rates and corporations’ agility at manipulating loopholes, resulted in a huge bonanza of additional corporation tax over the last ten years or so, as many MNCs (multinational corporations) either falsely said production had taken place here so they could pay lower taxes, or headquartered their businesses in Ireland, which allows them do the same. However, again demonstrating their philosophical poverty, the Irish Government did not effectively utilise this windfall cash to invest in infrastructure, establish a solid economic foundation, or improve public services. It now appears that these loopholes are being closed.
Ireland is sitting on an economic fault line between the US and the EU, which is being exposed in this emerging trade conflict. The United States has become Ireland’s largest export market. Last year, €73 billion worth of exports, €44 billion of which was from the pharmaceutical industry, which employs 45,000 people here. Specifically, in goods, not services, the US has its fourth-largest trade deficit with Ireland, behind China, Mexico, and Vietnam. In reality, this is a deficit the US has with US corporations that are based in Ireland. These corporations are the source of the bulk of investment in Ireland and the Irish Government has become unsustainably dependent on US corporations for revenue to fund its day-to-day spending. A quarter of all tax comes from corporate tax, with the vast bulk being paid by US firms. It is estimated that just three US companies pay a third of the total corporate tax collected in Ireland.
Ireland is closely connected to the US, but its trade and tax policies are governed by the EU. The Irish government wants to plámás Trump and is very concerned that the EU will take a hardline in defending other powers’ interests against him in a way that disrupts the economic connection of Ireland with the US. The legal battle currently underway, in which the EU is targeting Meta, Google and Apple over breaches, highlights why the Irish government is concerned.
Fall in economic growth
The ESRI has indicated that if 25% tariffs are imposed, that could reduce the Irish economy by up to 3.7%. That is very substantial and not far off the drastic decline during the years 2008 to 2010. Such tariffs would significantly impact exports, and therefore also jobs and investment, as well as tax revenue. It wouldn’t take much to turn the Government’s surplus into a deficit. If Trump’s policy forced an actual restructuring by the pharmaceutical giants, then the consequences could be devastating for Irish capitalism.
Even if some companies just shifted their nominal headquarters back to the US, that could have a significant impact, resulting in a collapse of windfall corporate taxes, as well as a substantial reduction in the nominal size of the economy here, as the falsely inflated figures begin to reflect real production. Such a shift in lower revenue and a smaller economy, in turn, could have a significant impact on Ireland’s credit rating and ability to borrow money.
Fianna Fáil and Fine Gael are clueless in the face of this emerging crisis. They are already preparing to once again lump the cost onto us. This must be resisted. Instead of burning the future of working-class and young people so the super rich can continue to live in obscene luxury, this time young people should take the lead, encouraging the rest of the working class to organise to challenge capitalism here and internationally, and end its inequality, its divide and rule, its wars, and its ecological destruction.
