Donohoe warns National Economic Dialogue on tariff threat to economy
The near-term economic outlook is 'clouded in uncertainty', which is weighing on consumer and business spending, and this is likely to continue until there is clarity regarding
tariffs
, Minister for Finance
Paschal Donohoe
will tell the Government-convened National Economic Dialogue on Monday.
Mr Donohoe is to address the pre-budget event involving trade unions, employers and other interest groups, which is taking place at Dublin Castle.
Mr Donohoe's opening address will lay out the State's current economic backdrop and the headwinds it faces, pointing out that the impact of tariffs on consumer and business spending has led the Government to revise down its forecasts for this year and next.
Modified domestic demand, which focuses on output in the domestic economy by stripping out multinational activity, is now projected to grow by 2.5 per cent this year and by 2.75 per cent next year.
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In the event existing tariffs were to remain in place, growth in modified domestic demand would be around 1.5 percentage points lower by the end of next year relative to the baseline scenario.
Mr Donohoe will also point out that the recent period of heightened inflation 'has passed', with prices 'now increasing at rates consistent with price stability', but admitted that the price level 'is now higher'.
More broadly, Mr Donohoe will say we are now navigating a markedly different economic environment compared with recent decades, one shaped by 'economic fragmentation and heightened geopolitical tensions'.
'This shift has significant economic implications, not just for trade, but for investment flows and long-term economic resilience,' he will say.
'Tariffs are a symptom of this new normal. Their re-emergence is worrying – taxes on imports lead to higher prices for businesses and consumers and create disincentives for firms considering long-run investments.
'More generally, the benefits of trade are being replaced by zero-sum thinking that is detrimental to living standards on all sides.'
Mr Donohoe will also pledge to use the money from last year's Apple tax ruling in the Court of Justice of the European Union to invest in the State's stock of infrastructure, particularly in the areas of housing, energy, water and transport.
'We know that these revenues are once-off and must not be squandered. They must be deployed in a transformative way – in a way that mobilises private capital such as inward investment. This is how we will maximise the return to the taxpayer on these funds.'
Looking at the fiscal parameters, Mr Donohoe will say Ireland's headline surplus, which exceeded €25 billion last year due to the Apple money, 'masks considerable vulnerabilities'.
'Much of the headline balance arises from a handful of large multinationals and, as I mentioned, the mood-music is changing,' he will say. 'It is not appropriate – indeed it could be dangerous – to plan on the basis of these receipts being permanent.'
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