A TIT-FOR-TAT transatlantic trade war would hammer the Irish economy for BILLIONS a new report stated as Finance Minister Pascal Donohoe admitted: We’re bracing ourselves.
A working paper by the Economic and Social Research Institute found that levys imposed by US President Donald Trump would likely to spark a rise in inflation and hit jobs.
It warns that ‘tit-for-tat’ tariffs could lead to a €17billion fall in GPD over the next five to seven years, while multinational could also up sticks and leave.
The paper states that the “traded sector of the economy”, such as exports, is likely to be disproportionately impacted by these protectionist measures due to its strong linkages with the global economy.
Worryingly, the ESRI paper states that if US protectionist measures target specific sectors that are important to the Irish economy, this could lead to an even greater decline.
It added: “This would likely be even more severe than our scenario analysis suggests.”
Dr Paul Egan, an author of the working paper and a Research Officer at the ESRI, said: “Our research shows that protectionist policies have the potential to significantly impact the Irish economy, with the traded sector disproportionately affected.
“This, in turn, would lead to a significant impact on the labour market, consumption and the domestic economy as a whole.
“Protectionist policies may also prompt multinationals to relocate to the US, posing further risks to the Irish economy and public finances.”
Responding, Minister for Finance Donohoe admitted there is “clearly unprecedented levels of uncertainty” regarding global trade and that tariffs on transatlantic trade could be introduced.
He added: “Government must, of course, plan for all eventualities, and the work being published today by my Department and the ESRI provides one piece of the analytical jig-saw needed to chart a way forward.
“Ireland has been a massive beneficiary of globalisation and we remain an strong advocate of free-trade policies. Ireland and the US enjoy a mutually beneficial, two-way economic relationship.
“Government will continue to work to improve the enterprise climate in Ireland, including by ramping-up capital spending in key strategic areas, including energy, water, transport and housing.
“This is how we will remain competitive against a backdrop of heightened uncertainty.”
Sinn Fein TD Pearse Doherty called for the EU to express to the US administration that a reciprocal trade war would be detrimental to citizens in both jurisdictions.
He said: “The only way to win a trade war is not to be involved in the first instance.”
He added: “I think that Europe needs to take a breath and and not react knee-jerk in relation to anything that may come down the line from the American administration.
“I think the paper also probably highlights what we have been seeing in Sinn Fein for quite some while, that we need to also build up the capacity in terms of our own domestic sector, our infrastructure, housing, obviously being a major issue that many companies, both multinational and national, mentioned to us.
“And the need to invest in our infrastructure to make sure that we remain competitive in light of any international events, some that are outside of our control.”
