The Trump administration is due to announce its plans for tariffs on goods imported by the US late this evening with new duties taking effect tomorrow.
David Murphy takes a look at how Donald Trump's tariffs plan could impact Ireland and Europe and for how long.
1. Prosperity: For decades Ireland’s success has been built on its reputation of a small open economy, which is attractive to multinationals.
A huge part of that prosperity has been built on ensuring there are minimal barriers to trade.
It has resulted in a strong jobs market, healthy public finances and low unemployment.
But anything that fundamentally interferes with its trade with the US could hit Ireland harder than other EU countries because a much larger proportion of our exports go to America than other member states.
2. Tax: The most immediate threat from US tariffs is from a drop in Ireland's corporation tax.
For years economists have been warning successive governments not to rely on the so-called windfalls paid by US multinationals.
The Central Bank has identified €15bn of these revenues, which it has described as "vulnerable" to a big policy shift by the US.
While Ireland has been setting some of this money aside in two funds for future spending, there will be broader implication for the public finances.
Already Paschal Donohoe, the Minister for Finance, has questioned whether tax cuts and spending increases could proceed if tariffs affect the amount of money the State collects in taxes.
3. Europe: Any response to US tariffs will come from the European Commission as Ireland is part of the EU trading bloc. This could be tricky.
Brussels may wish to take a tougher line than the Irish Government. Some reciprocal tariffs imposed by the EU could damage Ireland.
For example, Ireland imports about €6bn worth of pharmaceutical goods every year, much of which is ingredients for drug products used by multinationals here.
If a tax is imposed on those imports by the EU, it could create additional problems for drug manufacturers based in Ireland.
4. Long term: The effects from tariffs are likely to be much more serious in the long term.
Taxes on goods push up prices, hurt consumers and drive up inflation.
The ESRI and the Department of Finance estimate that the effect on Gross Domestic Product (GDP), a measure of the economy which includes the contribution of multinationals, could fall by 3.7% while the domestic sector may fall by 1.8%.
Minister Donohoe says that could result in up to 80,000 jobs, which would have been created here, not happening.
5. So is Donald Trump right? The US President’s policy is to bring manufacturing and employment back to the States and to stop large corporations paying lower tax in Ireland.
Certainly, some multinational activity routed through does not actually happen here.
For example, the subsidiaries of large US corporations in Ireland frequently use contract manufacturing that outsources manufacturing to low-cost locations but still book the sales in Ireland to avail of Ireland’s lower corporation tax.
These products, which are not made in Ireland, are counted as Irish exports.
The problem is how Mr Trump is approaching the issue could do huge damage on both sides of the Atlantic.
Of course all of this could be solved with a new EU-US deal resulting in the suspension of tariffs. But there is no talk of that, just yet.
