2025-12-09

7. Deputy Tony McCormack asked the Tánaiste and Minister for Finance his assessment of the impact recent international tariff changes are having on the Irish economy; and if he will make a statement on the matter. [64103/25]

Like my colleague Deputy Brennan, I wish the Tánaiste the best with his new portfolio and look forward to working with him.

I thank Deputy McCormack very much for his kind words. I look forward to working with him. I also very much welcome this question because while I look at it from the Department of Finance perspective now, previously in the Department of Foreign Affairs and Trade I engaged significantly on trade and tariffs at an EU level. It is so important we continue to, as he rightly says, monitor the impact all these issues have or could have on the Irish and European economies were there to be further changes. I very much welcome that the EU and the US have reached a deal on reciprocal trade. This provides much-needed certainty, or at least more certainty, to exporters. That said, tariffs continue to represent a clear headwind to domestic activity, particularly given the highly globalised nature of our economy. Updated analysis on the impact of tariffs on the economy was conducted by my Department and the ESRI. It was published alongside budget 2026 to reflect the current global tariff landscape. In this analysis, the introduction of tariffs is estimated to reduce our modified domestic demand by around 1.25% over the medium term when compared with a scenario with no tariffs, so it is having an impact. This represents a moderation in growth rather than a decline in economic activity. It is difficult at this stage to make a definitive assessment of the impact tariff changes are currently having on the Irish economy. In the first three quarters of the year GDP recorded double-digit growth on an annual basis. Front-loading of pharmaceutical exports to the US in anticipation of tariffs played a key role in driving headline activity in the opening months of the year. The continued strength of GDP in recent quarters suggests structural factors may also be at work, including significant underlying demand for a limited range of subcategories of pharmaceutical exports. My Department will continue to monitor developments in economic activity as more data becomes available. It is also important to say that forecast done by my Department was on this idea of a 15% tariff. We need to remember pharma is still at 0% because we have not yet had the outcome of the section 232 process and we need to monitor that very closely as well. It is evident global trade has become increasingly less conducive to the free and open exchange that characterised recent decades. In responding to the more challenging trading environment, this Government remains committed to ensuring the continued competitiveness and resilience of the Irish economy - controlling what we can control.

Gabhaim buíochas leis an Tánaiste. Our economy has shown remarkable resilience in recent years and Irish exports have held up strongly despite global tariff uncertainties. That is a credit to our businesses. However, SMEs and retailers are operating on very tight margins and tariff-linked increases in import costs risk eroding their competitiveness on the ground. Will the Tánaiste outline what steps his Department can take to support SMEs and retail businesses in managing tariff-related cost pressures in order that they can remain competitive, protect jobs and continue contributing so strongly to Ireland’s economic performance?

The Deputy is very much right. That is the reason we set up the Government trade forum. We have in the room now all relevant Departments, including mine, along with the Departments of Foreign Affairs and Trade, public expenditure, agriculture and enterprise. We also have the IDA and Enterprise Ireland meeting ISME, Chambers Ireland, IBEC, the American Chamber of Commerce Ireland and all the various agencies so we can continue to hear from the front line exactly what challenges they face. We continue to see an economy that is growing despite the tariffs. We continue to see a significant amount of what we export being exempt from the tariffs but it is why we have taken a number of decisions to try to support Irish businesses and SMEs. It is why we took the decision on the VAT rate on hospitality. It was not popular with everybody in this House but it makes a real difference in supporting cafés, restaurants, hotels serving food and the rural pub. It is also why, through the NDP, we are investing significantly in the infrastructure our towns, villages and cities need to remain competitive. We also published an action plan on market diversification with supports available through Enterprise Ireland.

One area feeling the impact of tariffs more directly is the Irish whiskey sector. Irish Distillers, Tullamore Dew and other smaller whiskey producers are paying higher tariff rates in the American market than Scotch producers while American bourbon enters the EU with no equivalent tariff. Irish whiskey is an export success story and a major employer across rural Ireland. Will the Tánaiste work closely with our EU partners to secure improved tariff conditions for Irish spirits so brands like Tullamore Dew can compete fairly and continue to grow on the world stage?

I absolutely will. The Deputy is right. This is the sector that got away from the final deal. I know from talking to the EU Commission and counterparts this is the next big priority for Europe because of course it affects us here via Tullamore Dew and Irish Distillers but it also affects France, Italy and other countries, as well as Scotland, if you like, outside the EU. This is an issue we as a country and as a Union would have liked to see in the deal. From my conversations with Secretary Lutnick and Ambassador Greer, President Trump's trade representative, what we all have to do now is show good faith in delivering on the agreement that is in place. That work is under way on both the EU and US sides. Then we have to sit down around a table again and see whether there are areas where it simply makes sense to do more. The Deputy is right. I have been in Washington, New York and across the United States and there are Irish companies and distillers that would have made investments in the US that would have created US jobs but that have stopped or at least paused those as a result of the impact of the tariffs. President Trump's agenda is about creating more jobs in his country. We can help with that agenda but the 15% tariff is a problem in relation to that.