Trump’s war on multinationals tests Ireland’s economic miracle

Donald Trump’s trade war is forcing Ireland to confront the fragile foundation of its economic miracle.

One economist saw it coming. In the summer of 2024, just after taking up an economic advisory role to Ireland’s government, Stephen Kinsella, professor of economics at the University of Limerick, warned that the next crisis wouldn’t be homegrown — it would come from Washington.

“The most obvious source,” he said, “would be the election of Donald Trump.”

If Trump moved to block U.S. multinational investment in Ireland, the shock, he said, would make Ireland’s earlier period of austerity “look like an episode of the Care Bears.”

Within months, Kinsella’s prediction began to materialize. Trump returned to the White House. He publicly called Ireland a “tax scam” and launched a trade assault that threatened the Irish exports of American pharmaceutical giants like Pfizer. Meanwhile, the EU — eyeing retaliation — has considered targeting big tech firms also based on the island, such as Apple, and reviewing services imported from the U.S.

From every angle, Ireland’s unusually buoyant economy suddenly looked exposed.

This has much to do with Ireland’s recent economic success being linked to the fortunes of U.S. multinationals. Such corporations, many of them with market valuations exceeding Ireland’s own GDP, employed an estimated 620,000 people across a workforce of 2.9 million in 2024, according to Ireland’s National Statistics Office.

Even more stark: Just 10 international corporations account for over half of all corporate tax receipts — and they make up more than a third of total Irish government revenue.

“It’s the highest reliance on corporate income among developed countries,” said Aidan Regan, political economy professor at Dublin’s University College and a vocal critic of the Irish model.

The risk is not just economic slowdown, but a systemic shock. As Kinsella told a business podcast: “We are an economy that is very strangely structured, a beautiful freak.” And: “To lose the top three biggest, most concentrated players [would] basically wipe us out.”

Kinsella declined to be interviewed for this story because of his government advisory role. But his analysis is shared by many including the country’s Fiscal Council, a statutory body set up to monitor Irish fiscal policy.

Disappearing windfall

In April, the Fiscal Council warned the government not to use corporate windfalls to fund permanent spending, because of the risk they could “easily disappear.”

The source of these Irish corporate revenues is no mystery. What appear to be pharmaceutical exports or imports of digital services are in substance the effects of massive U.S. firms shifting their profits to Ireland, via intangible assets like intellectual property.

The data tells the story. Corporate tax receipts began surging in 2015, following OECD-led reforms that curbed some abuses elsewhere but left key loopholes intact.

As a result, many companies chose to anchor their royalty-generating assets in Ireland, where the tax on such income is a minuscule 6.25 percent. According to EU Tax Observatory research, Ireland is still leads the global rankings for corporate profit shifting.

“Ireland is both in a very privileged position and a very precarious position,” Regina Doherty, a former Irish government minister who is now a member of European Parliament with the center-right European People’s Party, told POLITICO in May.

Her party, Fine Gael, has been part of coalitions that governed Ireland through a series of shocks, including the post-2008 financial crisis, Brexit, and the pandemic — but the Trump shock may be the most serious of them all.

“Certainly [this] is the most challenging time that I can remember in my political and adult career,” Doherty said.

To guard against potential vulnerabilities, Irish officials have scrambled since Trump came to power to build relationships with U.S. state governors and congressional figures, hoping to soften Washington’s stance.

When Taoiseach Micheál Martin met Trump in the Oval Office in March, he leaned on talking points from the Irish American Chamber of Commerce, describing the U.S.–Ireland relationship as a “two-way street.” Ireland is now the sixth-largest investor into the United States — a fact increasingly invoked as evidence of a balanced partnership.

But Dublin is also lobbying hard within the EU to shield U.S. firms.

Doherty warned that introducing a bloc-wide digital tax would be “incredibly damaging for the Irish economy” and said Ireland would “continue to advance that view with EU partners.”

The EU is negotiating to avoid tariffs, including on sectors such as pharmaceuticals which Ireland’s corporate revenues depend on. It has abandoned the idea of a tax on digital firms to get more revenues for its own budget, but if there is no deal it has tools to hit U.S. services and investments.

Fortress Ireland

Even as it defends U.S. multinationals abroad, Ireland is scrambling to fortify its economy at home.

Speaking at the Global Ireland event in May, Frances Ruane, chair of the National Competitiveness and Productivity Council, said that dealings on the U.S. front require patience — but at home, they “need to move more quickly.”

Ireland, she said, must invest in infrastructure and scale its indigenous economy, particularly energy grids and data centres, if it’s to ensure its economic miracle does not go to waste.

Ruane also called for expanding R&D tax credits for domestic firms and for tapping into new common strategic EU funding programs.

“What really matters is that the small countries make sure their voice is heard so that this does not become a concentration,” she said, referring to the risk of larger countries capturing the lion’s share of EU support.

At the same event, Martin echoed this push, unveiling new bilateral strategies for deepening ties with Germany and France. Still, he stressed that “even if others step back, Ireland will continue to engage” with the U.S. “at all levels.”

Whether that strategy is enough to shield Ireland from a global reordering of corporate geography remains to be seen.

Back in Dublin, however, the domestic political class has been absorbed by other matters — like a parliamentary feud over whether pro-government independents can ask questions during sessions with the Taoiseach.

Meanwhile, the underlying model of Ireland’s prosperity is beginning to wobble.

On the surface, the island’s economy continues to perform at an incredible growth rate. In the first three months of the year, it notched up a massive 9.1 percent rise in GDP, according to the country’s statistics agency.

But the figures may be misleading. Economists and even Irish Finance Minister and Eurogroup President Paschal Donohoe say the effect was largely due to large multinationals rushing through exports to front-run Donald Trump’s April 2 U.S. tariff announcement.

When the distorting effects of multinationals are stripped out of official data, the quarterly growth rate comes in at a decidedly more modest 0.8 percent, according to official figures.

“It frustrates me to see what our political system is doing while Trump is unleashing an existential threat to the future prosperity of the Irish economy,” said Jim Power, an independent economist. “I’m hoping that the gravity of the threat to the Irish economy will drive policy in a better direction.”

This story has been updated.