Ireland among most vulnerable to trade war with US
Ireland exports a lot of pharmaceuticals to the US, while Government budgets are highly dependent on corporation tax receipts which are largely concentrated in a handful of US multinationals. File picture: David Creedon
Ireland is among the most exposed countries to changes in US trade policy due to its level of exports to the US as well as openness to global trade and business cycles, a report by European ratings agency Scope Ratings has found.
Ireland has a large trade surplus with the US due to the high level of pharmaceuticals manufactured here and exported abroad. In addition, Government budgets are highly dependent on corporation tax receipts which are largely concentrated in a handful of US multinationals.
Both of these taken together makes the country very vulnerable to a protracted trade war with the US.
The report said Ireland is among the most exposed countries to changes in US policy as goods exports are worth 12% of gross domestic product. Only two countries, Vietnam and Canada, are more exposed on this front at 26% and 20% respectively.
The report said that the credit impact on EU member states will depend on their trade and financial exposure to the US as well as China.
It cited Ireland as an example of a vulnerable country due to “high openness to global trade and business cycles” while it cited Italy for its “sensitivity to higher financing rates”.
Alvise Lennkh-Yunus, head of sovereign and public sector ratings at Scope, said that if the US pushes through and implements the full range of tariffs it “would represent the biggest peacetime trade shock to the global economy in more than 100 years”.
“If sustained, this policy shift will have important credit implications for both the US and for sovereigns globally,” says Lennkh-Yunus.
The ratings agency warned that the US could be downgraded if a lengthy trade war erodes trust in the dollar.
