US president Donald Trump’s tariffs pose a “major downside risk” to Ireland’s economy, Central Bank governor Gabriel Makhlouf has warned, particularly if tariffs and changes to US tax policy discourage American companies from investing here.
A “more significant slowdown” in the world economy “cannot be ignored” as a result of the US policies, which underlines the threat to Ireland’s public finances given their reliance on a small number of big companies corporation tax payments, Mr Makhlouf said in a speech on Wednesday to the Dublin Chamber of Commerce.
“The economic vulnerability here to a more fragmented trade and investment dynamic between the EU and the US is considerable,” Mr Makhlouf said.
“Depending on the specifics, the application of tariffs and non-tariff barriers could significantly impact the operations of [multinational enterprises] in Ireland over the longer term, particularly if they affect their relative profitability.”
[ US economy contracts as Trump tariffs prompt import surgeOpens in new window ]
Ireland is widely considered one of the most vulnerable European Union countries to the US plan to implement tariffs around the world. About 211,000 people here work directly for US companies, according to the American Chamber of Commerce Ireland. Pharmaceuticals, much of which go to the US, accounted for almost two-thirds of Ireland’s exports in February.
“The most immediate reflection of this may be in the public finances, given the large share of corporation tax receipts arising from US [multinationals], with corporation tax now accounting for over a quarter of all tax revenue,” Mr Makhlouf said.
“This likelihood increases further if trade-related barriers coincide with broader changes in tax and industrial policy that could discourage investment and activity in Ireland.”
The exchequer took in €39.1 billion in corporation tax in 2024, up 64 per cent on a year earlier. That outstripped income tax, traditionally the biggest contributor to State coffers and underlined Ireland’s reliance on tax from companies. The Government has repeatedly warned against using what it calls windfall taxes to fund day-to-day spending.
“Such situations pose a major downside risk to the economic outlook,” Mr Makhlouf said. “Even without specific details or the actual implementation of policies, the current rapidly changing policy environment is significantly elevating uncertainty, and this uncertainty is already weighing on business investment here.”
The governor reiterated warnings from the International Monetary Fund that the outlook for the global economy is already clouded by the tariff uncertainty, adding that increased trade barriers or “tit-for-tat” responses from countries would pose “significant challenges.”
Mr Makhlouf, who sits on the European Central Bank‘s (ECB) governing council which sets interest rates, stuck to the ECB’s stance on taking a “meeting-by-meeting” approach on whether to cut interest rates further.
The bank is widely expected to reduce rates for an eighth time at its next meeting in June.
He warned that “financial conditions” are tightening across the continent while “uncertainty is weighing on consumer and business confidence” and companies are less likely to invest until there is clarity on future trade policy. While fears about rising inflation could make the ECB more cautious on future rate cuts, Mr Makhlouf said the strengthening of the euro against the dollar would help slow price rises.
Overall, it is “difficult to say” what impact the uncertainty will have on inflation, he said.
About 20 members of the Ireland–Palestine Solidarity Campaign protested outside Dublin’s Westbury Hotel on Wednesday night as Mr Makhlouf was speaking.
Protesters said the Israeli government bonds sold within the EU were being regulated by the Central Bank of Ireland, raising questions about “Ireland’s complicity in the genocide”.
Israeli bond prospectuses are rubber-stamped in Ireland in order to access the EU market in the wake of Brexit. The United Kingdom previously undertook the work.
A letter published previously on the Central Bank’s website, said it was Mr Makhlouf’s view that the regulator “has to approve a prospectus for the offer of securities to the public where it meets the required standards of completeness, and consistency”.
A strong Garda presence stood guard at the entrance to the hotel and between the hotel and Grafton Street. The protesters dispersed peacefully about 7.30pm
