The failure of EU-US trade talks would have immediate ramifications for the upcoming budget, Taoiseach Micheál Martin has warned.
“There’s no doubt that the tariff situation does create a completely different context leading into this budget,” Mr Martin said at the National Economic Dialogue event in Dublin.
US President Donald Trump has threatened to impose 50 per cent tariffs on imports from the European Union (EU) but has put a stay on the measure until July 9th to allow for talks.
“Until it’s resolved and until certainty is restored then it will be challenging in terms of the signing of a new budget,” Mr Martin said.
Ministers have raised the prospect of tax cuts for workers (promised in the Programme for Government) being dropped if the economic situation deteriorates.
“Europe is working very hard with its counterparts in the US to get a negotiated deal,” the Taoiseach said.
Brussels negotiators hope that by agreeing to a 10 per cent US tariff on all EU exports, they can avoid higher tariffs on cars, medicines, and electronics.
A major concern for Ireland would be if US tariffs are widened to include pharmaceuticals, which account for up to 60 per cent of the State’s exports.
Separately Mr Martin hinted that providing tax breaks for developers in the budget in a bid to boost the supply of apartments was still on the cards.
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“I don’t want to speculate in relation to taxation measures. Certainly on the National Development Plan, on the public expenditure side, very significant priority is being given to the housing issue,” he said.
“We’re looking right across the board about how we can get more houses built faster,” he said.
Will rent reform make building apartments viable?
“There was a need to create a certainty in policy to bring private sector investment,” he said, noting “the State can’t do it all”.
The Taoiseach also defended the rapid rise in spending in recent budgets, which the Irish Fiscal Advisory Council (Ifac) has flagged as a major risk to the public finances.
“We’ve had unprecedented events that have impacted recent budgets, Covid-19 in particular, and the inflationary spiral that followed” and the influx of Ukranian refugees, he said.
“We’ve had increased population growth on a significant scale over the last number of years, combined with infrastructural deficits (that) means there has to be a degree of catching up,”
“That said, expenditure is high,” Mr Martin said, noting “the important thing was to get a sustainable fiscal framework that balances revenue with expenditure”.
In a report last week, Ifac warned that public spending was rising much faster than planned and that this was the result of “poor budgeting” on the Government’s part
It said current spending was up 6 per cent so far this year, well above the 1.4 per cent uplift outlined in the Budget.
In his address to the plenary session, Mr Martin warned that rising economic nationalism and the significant increase in uncertainty would “unavoidably weigh on growth over the coming period”.
“As a small, open economy, there are many risk factors outside of our control,” he said.
“International decisions on trade policy will potentially harm our economy and those of our main exporter partners, both directly and indirectly,” he said.
