Taoiseach Micheál Martin has cautioned against any "premature" overreactions to US president Donald Trump's tariff threats after a whirlwind 24 hours of global economic chaos.
At the weekend, President Trump warned he would "definitely" impose trade tariffs on the EU as he progressed his long-promised economic offensive, but did not commit to a timeline as to when they would come into effect.
The prospect of a US-EU trade war has further fuelled concern among investors as global stocks fell on the eve of Trump's first set of sanctions coming into force against China. However, US tariffs on Canada have been delayed by 30 days following a last-minute call between Trump and Canadian prime minister Justin Trudeau.
Trudeau said on Monday night that the proposed tariffs of 25% on Canadian imports will be 'paused for at least 30 days while we work together'. The tariffs had been planned to kick in today.
Additionally, an eleventh-hour deal between Trump and Mexican president Claudia Sheinbaum was reached on Monday to pause plans for 25% tariffs being levied by both countries.
The news encouraged Irish ministers that Trump's tariff threats are simply being used as a crude "negotiating position".
"It's clear that it's a negotiating position, but it has severe consequences," one Cabinet minister told the Irish Daily Mail on Monday night.
Under the deal, Mexico agreed to send 10,000 members of its national guard "to prevent drug trafficking from Mexico to the US, in particular fentanyl," while the US agreed to work to prevent high-powered weapons crossing the border into Mexico.
A 10% tariff is set to be applied to Chinese goods today, though Trump is set to talk with Chinese president Xi Jinping.
Financial analysts say the tariffs would measurably add to US inflation, which the Federal Reserve has not quite managed to get down to its goal of 2%. Ireland would be among the worst-hit EU countries by a trade war between the two trading blocs. Figures for last year show the US was the biggest buyer of Irish goods, accounting for €54bn in trade and 28% of all our exports.
However, around €36bn of these exports were pharmaceuticals and chemicals, which the US would not be able to find easy alternatives to in the event of a trade war, according to experts.
Economist Austin Hughes told the Mail he believes President Trump is "posturing," but said there is "no question it is very disturbing and very dangerous for the global economy."
In relation to pharmaceuticals, Hughes said that the US would be "shooting itself in the foot" by imposing tariffs for its own consumers as "there isn't an easy alternative".
He said the only gain available for Trump would be a commitment from the EU to purchase more US goods, such as cars. Hughes said that tariffs would lead to immediate cost increases for US consumers, which could benefit Europe.
"The US tariffs are going to lead to higher prices on fuel and food in the US, which is stupid," he said. He added that "if inflation picks up quickly" then Trump "may not be able to go on a grand sweeping campaign against Europe" as US households and businesses will already be feeling the inflationary hit of evaporating spending power.
Senior Cabinet sources told the Mail that they had been expecting Trump to "honour and fulfil what he threatened" in the election campaign.
A source said there would be "some disturbance" but that Mexico and Canada were good "test beds" for how the threats are followed though and the fallout. They said that there is a "high level of unpredictability", but added that "we don't know" what sectors would be targeted.
However, the source said that scenario planning has been ongoing between the Taoiseach's department and the departments of Enterprise, Finance and Foreign Affairs to see "what various consequences might look like" since Trump was elected in November.
The source also said the US multinational corporations that are based here and generate the bulk of the country's corporation tax receipts are "here to stay" despite the protectionist Trump administration seeking to entice them out of Europe.
"I think it's clear that we're not going to see a flight of US multinationals out of Ireland as Trump might have wanted," the source explained. They added that "the sense we're getting from them is that they are thinking long-term, beyond a Trump presidency and are here to stay".
President Trump appointed Wall Street CEO Howard Lutnick to head up the Commerce Department, which is responsible for implementing tariffs. In October, Lutnick outlined his desire to target Ireland's budgetary surplus.
"It's nonsense that Ireland of all places runs a trade surplus at our expense. We don't make anything here any more - even great American cars are made in Mexico. When we end this nonsense, America will be a truly great country again. You'll be shocked," he wrote in a post on X, formerly Twitter, in October.
Speaking ahead of a meeting of EU leaders in Brussels on Monday, Martin said that given the US and the EU have the biggest economic relationship in the world, damaging it would harm both parties.
"In our view protectionism more generally will harm citizens, no matter where they reside, and that tariffs are a negative in respect of economic development," he said. "We are a small open economy, we depend on trade and it is our view that the [EU] has championed that and we continue to champion that, and Europe will work together on these issues and engage with the US in a constructive manner."
Asked how the EU should respond to Trump's tariff threat, the Taoiseach said that the bloc "has to act as one".
"We are an economic entity, we have a single market," he said. "First of all, we have to see what happens and assess it and measure it, calibrate the impacts, and then develop our response.
"But I wouldn't do anything prematurely right now, until we see what exactly is being proposed, if something is being proposed. What is essential is that the European Union acts as one and will act as one."
The Taoiseach added: "I think in unity, there is strength."
Photo: Donald Trump. (Pic Jim Lo Scalzo/EPA/Bloomberg via Getty Images)
