Gerald Nash (Louth, Labour)
Link to this: Individually | In context | Oireachtas source

192. To ask the Minister for Finance if he is concerned at the impact of US tariffs on the public finances; the preparations he is making to secure the public finances in regard to the potential impact of tariffs on the Exchequer; and if he will make a statement on the matter. [16459/25]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

As I have said on many occasions, we very much regret the imposition of any tariffs. Our view is that they are economically destructive and push up costs and prices, hurting all parties involved. However, the reality is that we are now facing into a period of significant disruption to trade due to tariffs that will, unfortunately, directly impact on Irish exports.

In anticipation of this announcement, my Department and the ESRI recently published a a joint analytical paper which included the modelling of a range of tariff scenarios and the impacts on the Irish economy.

The analysis shows that Modified Domestic Demand – the most meaningful metric for the Irish economy – would be between 1-2 per cent below its no-tariff baseline level over the medium-term depending on the extent of tariffs.

The potential impact on GDP is larger, estimated at around 2½ to almost 4 per cent below a no-tariff baseline, although changes in GDP have less of an impact ‘on the ground’. The slowdown in domestic growth would be accompanied by lower-than-assumed employment growth, which is expected to be around 2 to 3 per cent lower compared to a no-tariff baseline.

The model results suggest that the impact on tax receipts would be broadly similar to the effects on the macroeconomy. Importantly, however, the paper does not account for changes to the firm- and sector-specific factors that have produced ‘windfall’ corporation tax receipts in recent years. As a result, the impact of an escalation in protectionism on the public finances may be higher than is estimated in the paper.

There has been significant progress made in recent years in mitigating the risks around the concentration of corporation tax receipts and improving the resilience of the public finances. Indeed, the Future Ireland Fund and Infrastructure, Climate and Nature Fund both enable Government to prepare for future fiscal challenges and, at the same time, remove a large portion of ‘windfall’ receipts from the day-to-day expenditure base. Ultimately, the best way to mitigate the risk of an over-reliance on potentially transient windfall revenues is to keep public expenditure growth at sustainable levels, which will be achieved by following the appropriate budgetary strategy.