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THE MOST IMPORTANT thing to note about the possible impact Trump’s second presidency could have on Ireland is that there is absolutely no clarity on anything.
Despite the endless digital ink spilled over how multinationals could pull out of the country, or we could be crippled by a trade war, there have been no concrete policies announced which will have a major impact specifically on Irish trade.
Trump tends to favour the splatter gun approach to policy announcements – float lots of them, often as bargaining chips, before seeing what sticks.
That said – some things have changed since we last covered this topic, just before Trump won the US presidential election.
The most obvious is that, while nothing has really been confirmed, there has been a big change in the international mood music.
A change to how US companies move their profits is still likely the biggest threat Ireland faces, given how heavily the country relies on corporate tax windfalls to fund public spending.
But the other significant issue to have emerged in recent weeks, at least from the perspective of Irish businesses, is that of a potential trade war.
So let’s have a quick look at both of them. But before we do, it’s worth again briefly addressing the concern around multinationals moving out of Ireland.
It’s estimated that there are just under 1,000 US businesses in Ireland, directly employing approximately 200,000 people between them.
Many of these roles are obviously concentrated in the major tech and pharma firms – think Google, Meta, Apple, etc.
People working in these businesses tend to be paid much better on average, and so also pay an outsized share of Ireland’s income tax.
So the main concern would be if something were to happen to get these businesses to move back to the US – something which Trump has repeatedly signalled he wants to happen.
But it’s worth remembering that Trump also said this when he was last elected in 2016. He made plenty of similar comments insinuating that he would prioritise moving US firms in Ireland (see examples here and here).
In reality, that didn’t happen. There were about 155,000 people directly employed by US multinationals in 2016 in Ireland - that rose to more than 180,000 by the end of Trump’s first term in 2020, and has continued to grow since.
Many US companies have invested significant time, money and effort in building up their Irish operations. Some have large physical operations, such as Intel’s manufacturing facilities in Leixlip. These are multi-billion euro investments.
It’s possible that a change in policy could make it less attractive for US companies to establish new operations here. But it would take a lot to trigger anything close to a mass exodus of existing US operations here.
But a likely change which could have a significant impact – tariffs.
Probably the biggest development since Trump has assumed office is how tariffs have become the talk of the (global trade) town.
We explained in more detail before about what tariffs are. But the important thing to know: tariffs are taxes imposed on goods and services imported from abroad. So a 10% tariff adds $1 onto the price of every $10 of goods.
They are seen as a tool to protect domestic industries from foreign competition – Trump has said he is using them to protect American jobs. But critics say tariffs often drive up prices for consumers.
Trump had threatened to impose a 25% additional tariff on imports from Canada and Mexico, before walking that back after securing some changes on border security (which critics say were already going to happen anyway).
He did go ahead with a 10% tariff on China, triggering retaliation and starting fears of a prolonged ‘trade war’ – basically, an economic conflict where two countries make it more difficult for trade between them to function.
So far, no tariffs have been imposed on Ireland. But the country is part of the EU, and Trump has said several times recently that he intends to impose taxes on the 27 member bloc.
This has the potential to cause some serious problems in Ireland.
The US is, by far, Ireland’s biggest export market. Businesses here sold €67 billion worth of goods to the US in the first 11 months of 2024, surging from €53 billion in 2023.
The vast majority of these exports came from US companies based in Ireland, such as pharmaceutical firms.
The main concern here would be that the sequence of events would go something like: Trump introduces tariffs on the EU, US companies based in Ireland face paying much higher charges, these multinationals decide they want to avoid the tariffs and move some operations back to the US.
But here, the devil will be in the detail. The last time Trump was in the White House, he imposed $7.5 billion worth of tariffs on EU goods in 2019.
While this sounds like a lot, it’s actually not enormous in the grand scheme of things. The EU had a trade surplus with the US of more than €150 billion in 2023. And US companies have continued to grow in Ireland.
This was because the tariffs didn’t apply to every business, but only certain industries or products.
Depending on what’s targeted this time, the impact of new tariffs on US firms in Ireland could be significant, or it could be relatively minor. We’ll have to see what Trump’s administration eventually decides on.
This really can’t be stressed enough – as things stand, the main risk for Ireland looks to be new policies which could impact multinational profit shifting.
Excluding the impact of the Apple tax case, Ireland took in over €28 billion in corporate tax in 2024. Frankly, it’s a shocking amount for a country which only had corporate tax receipts of about €5 billion 10 years ago.
This bonanza is almost entirely due to booming revenues at a handful of US firms – Tánaiste Simon Harris has previously said that just three companies account for €10 billion of the state’s corporate tax take.
These businesses do definitely have large operations here – as discussed, the likes of Apple and Lexilip have invested billions into their physical operations and employ thousands of people.
But Ireland’s corporate tax receipts were €7 billion in 2016, when US multinational employment was 155,000.
Since then, employment at US businesses has increased by about 33% – while corporate taxes have exploded by approximately 400%. So what’s going on?
Simply, many of these companies shift most of their international profits to their Irish operations.
We go into more detail here on how this works, but basically, US companies can do this after moving their intellectual property (IP) assets to Ireland. They initially chose to move their IP to Ireland for a few different reasons, including our low corporate tax rate and a tax break offered a few years ago.
The big risk for Ireland is that Trump would somehow get US multinationals based here to move their IP back to the States. This would mean these businesses would declare less of their profits in Ireland, and the state’s corporate tax take would likely fall.
Trump tried to do something similar during his first term, introducing tax breaks for multinationals to move their cash back to the US. Based on the amount of money flowing through Irish coffers, this wasn’t massively impactful, at least as far as Ireland was concerned.
But the US looks like it will try again, recently announcing tax benefits for companies which are looking to relocate their IP (although it’s worth noting this particular rule change was instigated before Trump was elected).
The state is currently only running a budget surplus because of these bonanza corporate tax ‘windfalls’ we’ve enjoyed in the last few years.
It’s also worth keeping in mind that it’s much easier to shift your IP compared to a factory. It would take years for a US business to shift their manufacturing abroad – they could likely move their IP in a matter of months.
If the recent US IP change, or other new policies, end up hitting Ireland’s corporate tax take, things could get very serious, very fast.
Despite the endless warnings from experts, Ireland is not prepared for the possibility of a dramatic corporate tax drop.
Given the noises coming from the US, it’s well past time that changed.
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