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Belfast Telegraph
26-05-2025
- Business
- Belfast Telegraph
AIB report warns on economic fallout of Trump's tariff threats
Global uncertainty over trade tensions and tariffs is expected to slow growth this year and next, with the risks heightened by the American president's bombshell threat on Friday to slap a 50% tariff on all EU goods sold into the US. Mr Trump backed away on Sunday, agreeing to extend the deadline until July 9 for talks between Washington and the 27-nation bloc to produce a deal. Mr Trump, who has repeatedly expressed disdain for the EU and its treatment of the US on trade, relented after European Commission President Ursula von der Leyen told him on Sunday that the EU needed more time to come to an agreement. She asked him during a call to delay the tariffs until July, the deadline he had originally set when he announced new tariffs in April. Trump told reporters he had granted the request. "We had a very nice call, and I agreed to move it," Mr Trump said before returning to Washington after a weekend in New Jersey. "She said we will rapidly get together and see if we can work something out." Ms Von der Leyen said in a post on X that she had a "good call" with Trump and that the EU was ready to move quickly. "Europe is ready to advance talks swiftly and decisively," she said. "To reach a good deal, we would need the time until July 9." Trump agrees to delay 50% tariffs on EU imports until July 9 The euro and US dollar rose against the safe-haven yen and Swiss franc after the deadline extension. It comes as Tánaiste Simon Harris wrote to Mr Trump's commerce secretary urging him not to hit the pharma and microchip sectors, which are of great importance to Ireland, with tariffs. The fear and uncertainty caused by Mr Trump's extreme and unpredictable policy announcements is feeding through to dampen consumer spending and business investment growth, with both expected to cool in Ireland, according to AIB's Economic Outlook Report for May 2025. The authors say the Irish economy has built up resilience to withstand a potential trade shock in the short term. Modified domestic demand, a measure that focuses on the so-called real economy, is forecast to grow by 2.3% this year, 2% next year and 2.6% in 2027. The jobs market is also expected to keep growing, but slower. AIB chief economist David McNamara said the uncertainty created by the dramatic shift in US trade policy and the responses of other key trading blocs is expected to dampen global growth this year and next, globally. 'Given the globalised nature of the Irish economy, we expect significant volatility in GDP as exporters seek to get ahead of potential trade restrictions this year. For the domestic economy we expect a cooling in growth this year,' he said. He thinks the economy here is now better positioned to weather a crisis than during the global financial crisis. 'Ireland enters this period of uncertainty from a position of strength, with the economy growing at a robust pace in recent months, while both the public and private sectors have built up material financial buffers in recent years,' he said. The report suggests households are building up savings in response to the uncertainty and are expected to pare back spending growth while some business sectors may delay planned investments, particularly those in export-orientated sectors, AIB's economist said. US tariffs and future US tax policy are the main downside risks to the Irish economy. Some exporting indigenous Irish sectors such as agri-food are exposed to US tariffs, but the key risk is to multinational-dominated sectors, which account for around 12% of total employment, but 80% of the value of exports and 50% of gross national product. There's now a heightened risk of tariffs on the Irish pharma sector, which, along with technology services, dominates multinational sector output, they say. A hit to multinationals could spill over into domestic sector output and jobs, they say. It comes as Mr Harris warned the US administration of the negative consequences of imposing tariffs on imported pharmaceuticals and microchips. He has written to US secretary for commerce Howard Lutnick following the latter's instigation of two investigations examining whether the reliance of the US on foreign imports in those sectors poses a risk to national security. The outcome of the investigations could result in significant tariffs being imposed on pharmaceutical and semiconductors sold into the US from abroad.
Extra.ie
26-05-2025
- Business
- Extra.ie
Irish economy faces shaky future as two factors set to curb consumer spending
The Irish economy faces a shaky future over global tensions as well as US threats to impose a 50% tariff on American imports from the EU. Political uncertainty over Donald Trump's tariffs, and the ongoing conflicts in Ukraine and Gaza, are likely to see Irish consumer spending decline until 2026, according to AIB's latest Economic Outlook Report, published today. Today's top videos STORY CONTINUES BELOW It said international volatility remains high, and because of that, consumer spending and business investment growth in Ireland are expected to cool this year. US President Donald Trump. Pic:However, AIB said the Irish economy has built up resilience to withstand a potential trade shock in the short term. The bank's chief economist, David McNamara, said: 'The global macro backdrop has shifted considerably since our last Economic Outlook in autumn 2024. 'The uncertainty created by the dramatic shift in US trade policy and the responses of other key trading blocs is expected to dampen global growth in 2025 and 2026. AIB. Pic: Artur Widak/NurPhoto/Shutterstock 'Given the globalised nature of the Irish economy, we expect significant volatility in GDP as exporters seek to get ahead of potential trade restrictions this year.' Mr McNamara added: 'For the domestic economy, we expect a cooling in growth this year, as ongoing uncertainty dampens both consumer spending and business investment growth.' The bank also forecast domestic demand will grow by 2.3% this year, slow to 2% next year, but bounce back to 2.6% in 2027. Pic: Shutterstock It also said that the labour market will continue to grow, but given the expected easing in economic growth, AIB expects a more modest expansion in employment, which is already at record levels. The bank said that following a 2.7% increase in jobs in 2024, it expects employment levels to grow by just 1.8% in 2027. AIB said Irish households are expected to reduce spending, while some business sectors may delay planned investment, particularly those in export-oriented areas. On the issue of trade with the US – Ireland's single largest trading partner, with more than € 95 billion of imports and exports last year – AIB said tariffs and future transatlantic tax policy are the main downside risks to the Irish economy. The report said that some exporting indigenous Irish sectors, such as agrifood, are exposed to US tariffs, but that the key risks centre on Ireland's multinational-dominated sectors. 'These sectors, which account for [around] 12% of total employment, are responsible for 50% of GDP and [around] 80% of exports generated in the economy. There is a heightened risk of tariffs on the Irish pharma sector, which, along with technology services, dominates multinational sector output,' it said. AIB added that the key medium-term risk to the Irish economy is the concentration of tax revenue from corporation tax and income tax from staff working for multinationals. However, it also said the economy has built up resilience to withstand potential trade and foreign direct investment (FDI) shocks in the short run. 'However, permanent tariffs or changes to the US tax code which would reduce Ireland's FDI attractiveness would pose a greater longer-term challenge,' it said. The bank added: 'The latter scenario would require diversifying Ireland's FDI and export base to non-US markets, a review of our industrial model, further fostering of indigenous enterprises, and a focus on boosting competitiveness.'
RTÉ News
26-05-2025
- Business
- RTÉ News
Could Ireland weather a tariff and FDI shock?
An escalation in trade tariffs could lead to a slowdown in global and Irish growth this year and next, according to AIB's latest Economic Outlook Report. The forecast comes after Friday's announcement by US President Donald Trump of a 50% tariff on EU imports to the US, which he has since confirmed will come into effect on June 1. Each report has a theme in focus, and this one is "Could Ireland weather a tariff and Foreign Direct Investment (FDI) shock? – A balance sheet perspective". A timely question. It finds the Irish economy has built up resilience to withstand potential trade and FDI shocks in the short run. However, permanent tariffs or changes to the US tax code which would reduce Ireland's FDI attractiveness, would pose a greater longer-term challenge. The latter scenario would require diversifying Ireland's FDI and export base to non-US markets, a review of our industrial model, further fostering of indigenous enterprises, and a focus on boosting competitiveness. Irish modified domestic demand is forecast to grow by 2.3% this year, 2% in 2026 and 2.6% in 2027, according to the bank. Irish households are expected to pare back spending growth while some business sectors may delay planned investments, particularly those in export-orientated sectors. The report reveals recent consumer spending has been robust. Public and private sector balance sheets have low debt levels and high savings on aggregate. While economic risks are tilted to the downside, balance sheet resilience remains a mitigant. The report finds US tariffs and future US tax policy are the main downside risks to the Irish economy. Some exporting indigenous Irish sectors such as agri-food are exposed to US tariffs, but the key risk centres on Ireland's multinational-dominated sectors. These sectors, which account for around 12% of total employment, are responsible for 50% of GDP and around 80% of exports generated in the economy. There is a heightened risk of tariffs on the Irish pharma sector, which, along with technology services, dominates multinational sector output. According to the forecast, any negative spillovers from the multinational sector could hit domestic sector output and employment. However, the key medium-term risk to the Irish economy is the concentration of our taxation base in corporation and income taxes sourced from the multinational sector. The report forecasts continued growth in the labour market, but given the expected easing in economic growth, we expect a more modest expansion in employment. Following a 2.7% rise in 2024 we see employment growth slowing to 2% in 2025, 1.5% in 2016 and 1.8% in 2027. Although supply chain spillovers from the multinational sector to the domestic economy are significant, the employment footprint of the sector is relatively small, and generally focused on urban centres. AIB Chief Economist David McNamara said "The global macro backdrop has shifted considerably since our last Economic Outlook in Autumn 2024. The uncertainty created by the dramatic shift in US trade policy and the responses of other key trading blocs, is expected to dampen global growth in 2025 and 2026. "Given the globalised nature of the Irish economy, we expect significant volatility in GDP as exporters seek to get ahead of potential trade restrictions this year," Mr McNamara said. "For the domestic economy we expect a cooling in growth this year, as ongoing uncertainty dampens both consumer spending and business investment growth. Nonetheless, Ireland enters this period of uncertainty from a position of strength, with the economy growing at a robust pace in recent months, while both the public and private sectors have built up material financial buffers in recent years."
Leaders
18-03-2025
- Business
- Leaders
Saudi Arabia Poised for 3.8% Economic Growth in 2025: OECD
The Organization for Economic Cooperation and Development (OECD) projected that Saudi Arabia's economy will see a significant growth during 2025. In a recent report, the OECD expected that Saudi Arabia's gross domestic product (GDP) will increase from 1.2% in 2024 to 3.8% in 2025, despite the global economic challenges. Inflation Stability In its Economic Outlook Report for March 2025, the OECD projected that inflation in Saudi Arabia will remain relatively stable at 1.9% in 2025 and 2% in 2026. The Kingdom's inflation rate is low compared to higher rates projected for many major economies due to trade-related disruptions and higher labor costs. The stable inflation rate in Saudi Arabia comes in contrast to the OECD's projections for broader inflation. The report expects G20 headline inflation to fall from 3.8% in 2025 to 3.2% in 2026, while the core inflation will stay above target in many advanced economies, including the US. Saudi Oil Sector The Kingdom's oil sector plays a key role in driving its economic growth. The oil sector remains a key contributor to economic growth despite the ongoing diversification efforts under Vision 2030. The OECD report pointed to OPEC+ plans to gradually 'unwind production curbs' that will start in April 2025, expecting significant implications for this move on global oil prices. Meanwhile, Saudi Arabia's investments in vital sectors, such as technology, tourism and infrastructure, to boost non-oil revenues in line with Vision 2030, play a key role in bolstering economic resilience against market volatility. However, the OECD report warned that geopolitical risks and increasing protectionist policies in global trade could have consequences for energy markets, resulting in price fluctuations. Strong Performance The OECD projections for Saudi Arabia comes at a time when the world is facing growing economic uncertainties. Rising trade tensions, geopolitical instability, and inflationary pressures threaten a large share of advanced economies with slow growth. Interim #EconomicOutlook: OECD GDP growth projections for 2025 G20 3.1% 🇮🇳 6.4%🇮🇩 4.9%🇨🇳 4.8%🇷🇺 1.3%🇧🇷 2.1%🇹🇷 3.1%🇪🇸 2.6%🇺🇸 2.2%🇰🇷 1.5%🇲🇽 -1.3%🇨🇦 0.7%🇸🇦 3.8%🇫🇷 0.8%🇦🇺 1.9%🇬🇧 1.4%🇮🇹 0.7%🇪🇺 1.0%🇿🇦 1.6%🇯🇵 1.1%🇩🇪 0.4% 🇦🇷 5.7% 🔗 — OECD ➡️ Better Policies for Better Lives (@OECD) March 17, 2025 The OECD forecast for Saudi Arabia positions it among the G20 fastest-growing economies in the coming years. While the Kingdom's GDP is expected to grow to 3.8% in 2025 and 3.6% in 2026, the global GDP growth is expected to slow to 3.1% in 2025 and 3% in 2026. This will be accompanied by higher trade barriers in several G20 economies and increased policy uncertainty pressuring on investment and household spending. Global Growth Prospects The report pointed to the substantial risks caused by the increasing geopolitical and policy uncertainties. These risks include the escalation of trade restrictive measures. The US higher tariffs on imports from other countries, and retaliatory measures from the targeted nations, could disrupt supply chains and raise production costs on a global scale. In the light of this, the OECD report warned that if trade tensions further escalated, the global output could fall by around 0.3% over the next three years, and global inflation could rise by 0.4% per year over the same period. This could significantly impact Mexico, Canada and the US. Short link : Post Views: 1
