DUBLIN (Reuters) -Ireland’s economic growth is expected to slow to 2% this year if a 10% tariff on U.S. imports from the European Union remains in place, or 2.5% if tariffs are removed, Ireland’s finance ministry forecast on Tuesday.
Ireland is among the countries most exposed to sharp policy changes proposed by U.S. President Donald Trump, with a significant proportion of employment, tax receipts and exports dependent on a cluster of U.S. multinational firms.
The updated estimates compare to a forecast before Trump’s election that modified domestic demand (MDD) – officials’ preferred way to measure the economy rather than GDP – would grow by 2.9% in 2025 and similarly in 2026. MDD grew by 2.7% last year.
The finance ministry said MDD growth would slow further to 1.75% next year if the tariffs are still in place or expand by 2.8% without them. It said it truncated the updated forecast horizon to the end of 2026 due to the elevated uncertainty.
It added that employment growth would slow to 1.75% this year and around 1% next year if the trade barriers remain.
As a member of the EU, Ireland faces tariffs of 10% on many of its exports that could rise to 20% after a 90-day U.S. pause ends on July 8. Brussels has suspended countermeasures to give room for talks, with limited progress seen to date.
Research co-authored by the finance ministry found in March that Ireland faces a disproportionate hit from tariffs which, if permanent, could cause MDD to be as much as 1.8% smaller than it otherwise would be by 2032.
Ireland faces additional risks from planned U.S. tariffs on pharmaceuticals and potential U.S. corporate tax reform, both of which could hit booming Irish corporate tax returns that have delivered the healthiest public finances in Europe.
Separate data on Tuesday showed fears over future growth pushed Irish consumer sentiment sharply down for the second successive month in April to its lowest level in two years.
(Reporting by Padraic Halpin. Editing by Andrew Cawthorne and Mark Potter)
