If Donald Trump wins the presidency this November it will be bad news for Ireland, say economists.
If Trump stands by his bold statements against free trade and sets up barriers to trade such as import levies, Ireland, whose exports account for 10 percent of its economy, will be the most exposed country of any in the 19-country eurozone, reports CNBC.
According to data from the European Union, 24 percent of Ireland’s exports went to the U.S. last year.
Nomura economists Charles St-Arnaud and Anna Titareva have calculated that Irish gross domestic product (GDP) will drop by about 2.4 percentage points if exports to the U.S. decline by one-fifth under the Republican nominee’s proposed trade controls. This is in comparison to an average GDP fall half a percent across the eurozone.
Eurozone exports to the U.S. would likely fall due to Trump’s proposed 20 percent import tax, say the economists. In addition, foreign direct investment (FDI) would probably take a hit from Trump’s proposed one-off 10 percent tax on U.S. companies' repatriated earnings.
"Within the eurozone, Ireland is particularly exposed to trade and FDI shocks that could stem from Mr Trump's policy proposals … The weaker growth resulting from a potential decline in imports and US investment could mean weaker government revenue, leading to higher fiscal risks and yields in some countries such as Ireland," said St-Arnaud and Titareva in a report last week.
Other measures Trump has proposed include a 15 percent flat corporation tax, compared with the current 35 percent, and a 15 percent tax for outsourcing jobs.
Ireland’s low 12.5 percent corporate tax rate has made the country attractive to some of the world's largest pharmaceuticals companies, such as Pfizer and Shire. Measures to restrict so-called tax inversion deals and Trump’s proposed tax on outsourcing jobs could make Ireland less appealing for U.S. companies.
"A permanently lower corporate tax rate and a tax on outsourcing will likely permanently reduce US FDI flows to the eurozone and affect EUR/US$ [exchange rate]," said St-Arnaud and Titareva.
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