The US Presidential election is shaping up to be a high-stakes event for Ireland’s international trade relations.
In Brussels, there is the expectation of a massive trade war if Donald Trump wins a second term as US president. His recent rally speech sets the tone and poses multiple economic threats to the EU. Trump’s fixation on the US trade deficit with the European bloc is only second to his fixation with the deficit with China.
Currently, the EU sells more goods to the US than it buys, leaving the US with a deficit of €158bn last year. Ireland accounted for €32bn of the deficit, as our US exports rapidly grew.
Trump’s most recent comments on the campaign trail to impose 200% tariff on foreign car imports into the US have focused the minds of the German, French and Italian motor industry, which rely heavily on sales to the US market. The United States is the number one destination for EU-built cars, accounting for 29% of the total EU export value and 25% of US global car imports by value.
Trump has made no secret of his plan to impose across-the-board tariffs of 10% or 20% on friends and foes alike if he wins the election.
Needless to say, Ireland cannot escape the crossfire and will face the same antagonistic treatment as the rest of the EU countries.
Most worrying for Brussels is Trump’s promise to bring down America’s trade deficit by imposing massive tariffs on European products. His actions could also destroy whole sections of European industry in the process, including those in Ireland, if his plans to force businesses to move factories to the US work.
Just days ago, Trump also complained about EU competition investigations into American tech giants, saying he would tackle an EU court ruling that forced Apple to pay €13bn in unpaid taxes to Ireland if he is elected.
Of particular worry for the Irish Government is the reliance on investment from US corporations into Ireland. US foreign direct investment (FDI) in Ireland last year totalled €491bn dollars, according to the US State Department report, which also listed total FDI into the EU at $2.7trn, placing Ireland as the fourth highest-ranked investment location across the EU.
These direct investments are by manufacturing, IT, finance, insurance, and wholesale trading companies.
Adding grist to the fraught situation is the examination by EU regulators of foreign investment control. US software company Adobe’s proposed $20bn acquisition of smaller rival Figma in 2022 was blocked on grounds of competition concerns by Margrethe Vestager, the European Commissioner for Competition. The deal was abandoned in December 2023.
Also stretching its remit, the EU claimed jurisdiction over the proposed US biotech company Illumina’s purchase of cancer-screening startup Grail, even though the target had no presence in Europe.
Notwithstanding a healthy degree of doubt as to whether it had jurisdiction over the case, the European Commission hit Illumina with a record €432m fine in July 2023, after the company closed the deal without approval from EU regulators and ordered Illumina to sell the $8bn company in October, which they are appealing.
Last but not least, the EU Foreign Subsidies Regulation implemented in July 202, adds yet another layer of complexity for deals involving the EU market.
This increasing scrutiny by the commission will give the Trump administration plenty of reasons to block EU corporations trying to acquire US companies large and small, as they try to expand internationally.
Easy ammunition, if needed, for Trump advisers to argue that confronting the EU over what they see as its economic distortions will shrink the trade deficit, create jobs, and strengthen US national security.
The big question is whether European leaders have learned their lesson from the Trump first presidency and are more united and determined to aggressively face the likely trade concessions demanded by a Trump-led second Republican presidency.
Brussels was caught off-guard in 2018 when Trump first imposed tariffs on EU steel and aluminium. The EU retaliated only on part of those tariffs, hoping to de-escalate the fight. Rather than take that olive branch, Trump doubled down later that year by threatening to impose tariffs on EU car exports and rip up ties with Washington’s most important ally.