Podcast Ep 251: Conall Mac Coille, chief economist at Bank of Ireland, on the likely impact of the Trump Tariffs on Ireland and his outlook for the Irish economy.
In this interview Conall Mac Coille, Group Chief Economist at Bank of Ireland, outlines his latest analysis on the outlook for the Irish economy:
In recent weeks the Trump administration ignited what could become a global trade war by imposing a range of tariffs on its trading partners.
“There’s a lot still to play for and it’s very uncertain, but the damage that’s been done so far is pretty limited for Ireland”
For now, it appears the bulk of Irish exports are exempt, with just 2% to 3% of total exports affected due to Ireland’s concentration in services and pharmaceuticals trade. This means the immediate 1st round negative impact onto Irish GDP from tariffs will be limited.
However, according to Mac Coille, the more uncertain economic outlook may weigh on consumer spending and investment.
A robust expansion of Irish economy still on cards
Mac Coille told ThinkBusiness that it is still relatively early to judge to final impact, but his current forecast is for a softer, but still robust expansion in the Irish economy in 2025 and 2026.
“We revised down our forecast based on what we know at the moment.
Ireland faces a 10% baseline tariff, but pharmaceuticals are excluded. Only 2-3% of our exports are affected by the baseline tariff. That’s a great position to be in, better than some other countries, because so much of our exports are pharmaceuticals or ICT services. Our export sector should be relatively unaffected, although it’s clearly a difficult adjustment for companies that are affected.
“There’s uncertainty that will hold back consumer spending and investment spending. Pharmaceuticals could be included in the tariffs, and we may see escalation of trade tensions when the 90-day delay ends. We thought it appropriate to revise down our projections for that uncertainty and some limited impact from tariffs, but not to expect a recession.
“Looking at financial markets over the past couple of weeks, there’s some hope that the recent language from the Trump administration has been more conciliatory. Could we get a deal between the United States and China, or between the European Union and the United States? There’s a lot still to play for and it’s very uncertain, but the damage that’s been done so far is pretty limited for Ireland.”
I asked Mac Coille if there is any indication of how tariffs are affecting the economy so far.
“Consumer confidence fell to a two-year low in April, as expected given all the news, but it’s still well above the levels we saw after the beginning of the Ukraine war when we had surging gas and electricity prices and double-digit inflation really eating into households’ purchasing power.
“Savings are already very high from Irish households – you’re seeing a lot of deposit growth in the banking system. The household savings ratio is quite high at 15%. The Irish household sector hasn’t been taking on lots of credit card debt; they’ve actually been quite conservative in their savings decisions. The hit to sentiment could mean people save more, but I think that’s unlikely. We need to see more concrete negative news for there to be any pullback in consumer spending this year.”
But if trade tensions escalate, what are the risks for Ireland? Equity markets seem to have bounced back, but could we be through the worst of Trump’s tariff threats?
“We could be, but the 90-day delay will end in early July, and there doesn’t seem to be much progress in US-EU negotiations. Just in the last couple of days, the European Union has come out with its potential retaliation on $100bn of US imports.
“The Trump administration has launched a Section 232 investigation into the pharmaceutical sector, and the Department of Commerce Secretary suggested tariffs would follow that investigation. The vast bulk of our goods exports to the United States are pharmaceuticals – for now they’re exempt, but that could change.
“Then there’s potential retaliation in the ICT sector. The European Commission President has said they may use what they call the anti-coercion instrument, which would effectively mean measures targeting the ICT services sector – companies like Facebook, Google and so forth, which are very important for Ireland. That retaliation might look like a levy on their advertising revenues, for example, which would also potentially be negative for Ireland.
“There are plenty of things that could go wrong, but it’s going to take a number of hoops to jump through before we get to that kind of escalation of trade tensions. At the moment, things seem to be moving slightly in the other direction with talk of trade deals being reached at some point in the future.”
To learn more, listen to the full podcast
-
Bank of Ireland is welcoming new customers every day – funding investments, working capital and expansions across multiple sectors. To learn more, click here
-
For support in challenging times, click here
-
Listen to the ThinkBusiness Podcast for business insights and inspiration. All episodes are here. You can also listen to the Podcast on:
-
Spotify
-
SoundCloud
-
Apple
