Stock market turmoil: how Trump’s tariffs could impact Irish pensions and global trade

The past week has highlighted the up-and-down whipsaw nature of global markets, with trillions being wiped out, only to be added back on again days later.

For Irish households, it can be difficult to assess just how much stock market volatility will impact their lives. Few Irish people own stocks compared to other countries. 

A survey from the Banking and Payment Federation of Ireland (BPFI) found just 15% of Irish adults own shares in companies, far less than the more than 50% of US citizens. 

Differing financial instruments and the capital gains tax charged in Ireland are just some of the reasons for the disparity in stock ownership between the two countries.

Irish investors also remain generally more risk-averse than their US counterparts, having been burned in the not-so-distant past by the collapse of Irish banking shares following the financial crash of 2008.

The crisis saw Anglo Irish Bank’s stock fall by more than 15% in just one day, with banks and construction among the worst hit industries by the economic collapse. 

Irish bank bailout of €64bn in 2010

In fear of further damage the Irish government two years later injected €5.5bn into the three main banks and started what would later become a bailout totalling €64bn.

Echoing the volatility exhibited throughout 2008 and into the early 2010s, the market reaction over the past few weeks highlights the uncertainty of many to dip their toe in stocks.

In the past week, Europe’s Stoxx 600 market capitalisation fell by around €1.3trillion, while in the US, the S&P 500 shed nearly $6tn (€5.44tn), marking the deepest four-day loss since the benchmark’s creation in the 1950s.

A sell-off across Asian markets resumed this week with Japan’s Nikkei down more than 3%, while South Korea’s currency hit a 16-year low as government bonds suffered heavy losses as investors dashed for the safety of cash.

Until Wednesday, Mr Trump had largely shrugged off the market reel, offering investors mixed signals about whether the tariffs would remain in the long term. 

While describing them as “permanent,” the US president also boasted that the administration is pressuring world leaders to push for negotiations.

But all of that was turned on its head on Wednesday, when the Mr Trump announced he would postpone all reciprocal tariffs on US imports for 90 days.

“I have authorised a 90-day pause,” he said, after recognising the more than 75 countries he said have been negotiating on trade and had not retaliated against his latest increases in tariffs.

Global stocks rapidly rebounded. In the US, shares soared to one of their best days in history on a euphoric Wall Street, while the S&P 500 surged by 9.5%, an amount that would count as a good year for the market, let alone just one trading day.

European shares also made major gains on Thursday, following suit from Asian markets that also largely rebounded.

In Dublin, the Iseq All Share index also opened in the green, with lenders AIB and Bank of Ireland benefiting the most from the global stock rush on the back of Mr Trump’s tariff pause.

Irish investors may be slow to buy shares directly and volatility of the past week suggests their hesitancy may be prudent. 

However, refraining from owning shares does not mean we are immune to the high and lows of global markets.

For pension fund holders in Ireland, the impact of reeling share prices brought immediate pain, with many this week looking fearfully at their own pension funds hitting the red. 

But given the flux we have seen this week, head of global equities at stockbrokers Davy, Aidan Donnelly said market drops need to be viewed in a wider context.

“If you look at 2025 to date, equity markets are down by about 16%,” Mr Donelly told the Irish Examiner.

It is important, however, to remember that the very same markets were up by more than 26% last year, so we are still up overall.

“If you want to go back even further, comparing 2019 to now, global equity markets are currently up 54%. That was with a global pandemic, an inflation crisis, and other major shocks in that period.

“This is important, because pension fund holders are playing the long game.

“Unless you’re looking to liquify your entire pension right now, what is currently happening across the stock market is not of much relevance.

“For those only beginning their pension who are worried about the stock market, it could be another 40 years before it is drawn down.”

According to the most recent data from the Central Bank of Ireland, equities made up just 1.65% of total assets across Irish pension funds at the end of last year, totalling €2.4bn out of a total pool of almost €146bn.

It should be noted, however, that investment funds, which comprise a mix of government bonds, commodities, real estate, venture capital and equities, accounted for a further 28% of total assets in Irish pension funds, equating to around €41.3bn as of the end of 2024.

“People like to confuse volatility with risk,” Mr Donnelly said.

“Yes, markets are volatile, and on any given day, the chance of the market being down is 50/50. But the chances of getting a negative return over 10 years is 5%.

Major risk to pensions

“There is one major risk when it comes to pensions, and that is the risk it will not rise in tandem with inflation, meaning those drawing down their pension will not be able to sustain their lifestyle given the rise in general price levels.”

But aside from pensions, volatility in global markets, especially a hefty downturn, can easily bleed into the economy and impact consumers regardless of their own stock ownership.

With stocks being a major source of funding for some companies, their share performance can also impact other sources of funding. 

Take corporate bonds, for example. They differ from stocks in that they’re a loan that an investor provides a company in exchange for interest. 

Alongside stocks, corporate bonds were also largely sold off this week, which pushed their yields higher and made it more expensive for companies to raise money in the stock or bond market. 

Sustained over time, this heightened cost pushes companies to seek alternative funding options and can constrain their access to credit. 

If a major company struggles to borrow money, it will not take long for the wider market to know about it and for its own employee base to feel it.

Falling stock prices may also signal to a company’s leadership to spend more conservatively, which may include postponing expansion or acquisition plans, deferring capital spending, or embarking on hiring freezes.

It doesn’t take long for this to impact the everyday consumer. 

Sentiment in an economy can be a key determinant of spending levels, and we have already seen confidence among Irish households plummet over fears of a tariff-induced global trade war.

The latest Credit Union Consumer Sentiment report, released at the end of last month, showed Irish households’ confidence in the economy fell to a 10-month low as uncertainty clouded consumers’ future economic outlook.

According to the survey, fear was the key driver of the drop-off, rather than increased financial pressure, with consumers downgrading their outlook for the economy and household finances.

“It’s a no-brainer that consumer sentiment will be impacted by what is happening,” Mr Donnelly explains.

Companies will not be able to absorb these tariffs on their own, they will pass them on in the form of higher prices.

“In the near-term, of course the stock market will be affected, as will pensions. But the long-term risk is not stock market volatility, it is inflation.”

While the EU has agreed to a trade war ceasefire to allow for negotiations over the next 90 days, Taoiseach Micheál Martin has warned that the ongoing threat of heavy tariffs have not disappeared, stressing while reciprocal measures have been paused, a 10% tariff will still be levied on all EU imports to the US.

With an ever-volatile stock market, the looming threat of a trade war, and a falling consumer sentiment that is unlikely to recover any time soon, it is safe to say we are not out of the woods yet.