Tariff fallout set to harm Irish growth this year even if EU strikes deal with Trump administration

Irish Independent

19 hours ago

The EU has until Wednesday to clinch a crucial trade agreement with the US administration before tariffs on almost all exports to America surge to 50pc.
Brussels appears willing to accept an outline agreement that includes a 10pc baseline levy, with lower rates for key sectors such as cars, chemicals and pharmaceuticals.
Ireland would feel an economic aftershock even if such a deal is secured, according to Kate English, chief economist at Deloitte Ireland.
I am not on the page that Ireland is about to crash
She said the Irish economy was demonstrating resilience, with strong consumer spending, but believes growth will slow this year.
The Department of Finance recently warned growth is expected to slow to 2pc if Trump's 10pc tariffs remain in place.
'There is no world in which there isn't a fallout from this and a reduction of growth,' English said.
Despite this, she does not believe Ireland is about to experience a crash or a recession. Some businesses will feel more pain than others, especially those in low-margin sectors, such as the food industry.
'I am not on the page that Ireland is about to crash, or that a recession is coming,' she said. 'But, I definitely would believe growth will be slower than what we have been used to experiencing for the past few years.'¶She warned that extending the trade deal deadline would create more uncertainty, which had been damaging for investment decisions.
'Whatever comes from next week, if we get a deal, it provides some element of clarity or certainty to companies,' she said. 'At the moment, that uncertainty is causing the greatest amount of damage. People are pausing decisions by it. It is impacting sentiment. We know sentiment drives everything.'
Since Trump's tariff announcement, the euro has rallied against the dollar and is up nearly 14pc since the beginning of the year. This means Irish products have already become more expensive for American buyers.
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Some of the noise is louder than what will actually be implemented
Oliver Moloney, chief investment officer with wealth manager Fordel, said the euro's strength was acting like another tariff for Irish exporters.
He has been heartened by the market's stability since the significant declines that accompanied Trump's tariff announcements. Markets have more than recovered from the initial shock in April and appear to be heading on a positive trajectory, barring any huge surprises.
'Whenever markets are calm, they are probably more liable to some bad news on the downside,' Moloney added.
'If Trump comes out in a day or two and says: 'We are not going to cut any deal with Europe, they are not negotiating,' that may well cause a bit of a shock downwards,' Moloney said.
'But it seems like since April, people have digested this trade tension and understood that some of the noise is louder than what will actually be implemented in reality.
Markets do fall, but they take it in their stride
Moloney said investors should not panic if there is not a deal and the markets fall by 10-20pc next week. Such problems can create opportunities.
'Anyone that still has cash that they are due to invest or in the middle of building out a portfolio, a 20pc fall is usually a good time to buy in,' he said. 'Take Covid or the rapid interest rate hikes — markets do fall, but they take it in their stride.'
Pressure is mounting strike a deal with Washington, although fractures have emerged within the EU.
Germany and Italy are leading a pack of countries eager to cut a quick deal, even if it means a baseline of 10pc tariffs. However, last Friday, France described this was a bad deal for Europe.
Tánaiste Simon Harris has appeared to accept trade with the US will involve 10pc tariffs.
US threatened Sefcovic with 17pc tariffs on agricultural exports
He has not given up on a better deal, telling Edward Walsh, the new US ambassador, that the two countries should 'use every hour' to reach a zero-for-zero tariff settlement in as many areas as possible.
What shape any deal looks like will have to wait a little longer.
On Friday, Europe's chief negotiator, Maros Sefcovic, revealed he was returning to Brussels after failing to strike an agreement last week with his US counterparts. Talks are set to continue following what he called a 'productive week'.
However, the Financial Times reported the US threatened Sefcovic with 17pc tariffs on agricultural exports. Trump also wants US companies to have wide-ranging exemptions from regulations to help cut America's trade surplus.