Ireland in a period of 'volatility', says Central Bank boss as US-EU trade war looms

THE COUNTRY IS in a period of “significant change and volatility”, according to the Central Bank boss Gabriel Makhlouf. 

Speaking to reporters in Dublin today, he said the threats of trade dispute between the US and the EU are “extremely concerning”. 

Describing the “extreme uncertainty” as challenging, Makhlouf was reluctant to “speculate” on the impact of US tariffs might have on the Irish economy.

The Minister for Finance Paschal Donohoe said yesterday that the worst case scenario is that tens of thousands of jobs in Ireland could be at risk if US trade tariffs are introduced in early April.

But the chairman of the IDA Chairman Fergal O’Rourke told the Irish Independent last week that he doesn’t foresee any immediate job losses. 

When asked if he is jittery about possible job losses in the trade-war fallout, Harris told The Journal last week that the government will “control” what’s within its control by investing in Ireland’s infrastructure and competitiveness.

“I think Ireland approaches this period of turbulence from a position of relevant strength,” said the Tánaiste. 

The Central Bank boss said today that the bank’s views on the threats ahead are in line with those reflected in a report from the Department of Finance and Ireland’s Economic and Social Research Institute (ESRI).

It found that an intense trade dispute between the US and the EU would risk increased prices, fewer new jobs and slower growth in the economy.

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Makhlouf also said that the European Central Bank (ECB) must remain cautious about its next interest rate decision, despite inflation moving in the right direction.

He added: “I mean, as far as inflation is concerned, a lot will depend on exactly what is done, and not just what is done by the people imposing tariffs, but what is done in response to those, and not just by the authorities and how they respond, but also how businesses decide to respond.

“They may decide to change their supply chains. How consumers respond. Consumers may choose that they’re not going to buy particular products because of the price, there’s a lot of uncertainty in that.

“I think the job that we have to do, certainly in merger policy, in terms of the ECB, is just being extremely vigilant as to what’s going on, try and understand what’s going on, try not to speculate about what might happen, and make decisions on the basis of speculation.

He added that his views are not inconsistent with those made by Donohoe over the weekend. 

“It is extremely concerning. My overall sense is that we’re living in a period of significant change, significant volatility, and the most important thing that we can do is keep a clear head, understand exactly what is happening, and then make a decision on how to respond and start talking about what our view is as to its impact.

“The last thing I’d want to do is to start speculating in a way that was just uncomfortable.”

US-EU trade fall out 

There has been much talk over the last few weeks since US President Trump threatened 200% tariffs on European goods.

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A conversation has begun on looking at the list of retaliatory tariffs the EU plans to roll out, with the French Prime Minister Francois Bayrou recently stating that the European Union was probably mistaken in targeting American bourbon in its retaliation to US tariffs for the period ahead. 

In an interview with The Journal last week, the Tánaiste said he welcomed the fact that there “is an openness now” to looking at the list of retaliatory tariffs proposed by the EU.

“The sense at the start was whatever was on the list, the last time [during the first Trump administration], would automatically be rolled over. There seems to be an openness now at the European Commission to having a conversation about that. And I welcome that,” he said. 

He went on to state that any countermoves should always be strategic.

Previously, there was a tit-for-tat tariff lists between the EU and the US between 2018 and 2020. 

As reported by Politico in 2018, European Union officials took retaliatory action to Trump’s first administration, targeting products in politically sensitive Republican-run states, including the imposition of tariffs on Harley-Davidsons made in the then Speaker Paul Ryan’s home state of Wisconsin; duties on bourbon made in then Senate Majority Leader Mitch McConnell’s home state of Kentucky; and duties on orange juice from Florida, a critical swing state.

However, there is a view emerging that this list of goods might be outdated and warrants a re-look in terms of what products the EU should target, particularly if it is the view that there will be retaliation to similar products from the EU, such as Irish whiskey.

“The retaliatory tariffs the last time might not be the right ones this time,” said Harris.