With Donald Trump’s return to the White House, a new wave of uncertainty looms over the Irish economy. At F J Hanly & Associates, we’re focused on understanding how these developments could affect not only the broader economy but also the financial stability of our clients, particularly in sectors like pensions, investments, and corporate finances.

The Potential Economic Impact

One of the core elements of Mr. Trump’s proposed economic policy is a reduction in US corporate tax rates, potentially down to 15%. This change would bring US corporate tax rates into direct competition with Ireland’s, which currently sits at 12.5% for most companies and 15% for large corporations earning over €750 million annually. If these reductions proceed, US-based multinationals may be incentivised to shift investments and even operations back to the United States, potentially diverting from Ireland. This shift could ripple through the Irish economy, which has become increasingly reliant on corporate tax receipts, a substantial portion of which come from large multinational companies.

This concentration of tax revenue creates a risk for the Irish government, as a downturn in any single sector dominated by multinationals—such as tech or pharmaceuticals—could significantly affect public finances. For financial advisors, this means keeping a close eye on any changes in corporate strategy among key players like Apple, Google, Microsoft, and Pfizer, as these shifts may impact clients’ investments and retirement plans.

Tariffs and the Export Market

Another cornerstone of Mr Trump’s agenda is his stance on tariffs. While he previously targeted specific sectors, such as steel and aluminium, he has now indicated a desire to impose across-the-board tariffs on all imports into the US. Estimates suggest these tariffs could range from 10% to 20%, which could impact the competitiveness of Irish products in the American market—one of Ireland’s most crucial export destinations. For context, between January and August this year, Irish exports to the US totalled €45.6 billion, an increase from the previous year.

These tariffs pose a serious risk to Irish exporters, especially those in pharmaceuticals, who might consider moving production back to the US to sidestep these additional costs. This shift could also reduce investment in Ireland’s workforce and infrastructure, two factors that have historically strengthened Ireland’s economic resilience. For clients involved in or investing in export-dependent businesses, this is a risk factor worth monitoring closely.

Risks of a Trade War and Inflation

The likelihood of a trade war is a significant consideration. During his previous term, Mr Trump’s tariff policies led to retaliatory tariffs from trading partners, which drove up prices and contributed to inflation. Should this happen again, we may see increased costs for imported goods across the board, with inflation affecting consumer purchasing power globally. For individuals with exposure to global markets in their investment portfolios, inflationary pressures could affect both returns and purchasing power.

What Should Financial Advisors and Their Clients Consider?

At F J Hanly & Associates, we recommend a strategic review for clients potentially exposed to these geopolitical risks. Advisors should consider the following actions:

• Portfolio Diversification: Ensuring clients’ portfolios are well-diversified can help mitigate risks associated with concentrated exposure to specific markets or sectors.
• Monitoring Multinational Investments: Investors may want to track investment in large US-based multinationals to anticipate any potential shifts in operations due to changes in tax policies.
• Staying Informed on Trade Policies: As tariffs and trade policies evolve, clients may need adjustments to their investment strategies, particularly if they hold assets in export-dependent sectors.
• Considering Inflation-Protected Assets: Given the potential for inflationary pressures, clients might benefit from a portion of their portfolio being allocated to assets that typically perform well during inflationary periods.

As we enter this new phase of US economic policy under Mr Trump, our team at F J Hanly & Associates remains committed to guiding our clients through the uncertainty. By staying informed and strategically adjusting financial plans as needed, we aim to safeguard our clients’ financial well-being in these unpredictable times.