IS TRUMP ALL BAD?

Trump may actually force some positive things to happen

Donald Trump is shaking up the world in every conceivable manner and little is escaping his all-encompassing attention. Much of what he is trying to achieve could be considered negative in terms of the environment, global trade and economic activity, disease prevention, aid to poorer countries, and just the general sense that he is giving license to many leaders around the world to do whatever they feel like doing with impunity.

For reasons of balance, it must be pointed out that there are potentially some positives that might flow from his policy agenda. Firstly, perhaps he will force peace to break out in some conflicts, although many of us might not agree with his approach. Secondly, the potentially most positive impact of his actions could be the proverbial kick in the backside he is giving others.

Here in Ireland, perhaps we will now recognise the extreme concentration risk inherent in our economic model and realise just how important it is to diversify our economic and fiscal concentration risk. This concentration risk is manifested in a dangerous dependence on all things American. CSO merchandise trade data published last week show that in the first three months of this year, exports of Chemicals and Pharmaceuticals accounted for 75.5 per cent of total goods exports, with most of this driven by US companies. In 2024, this stood at an alarmingly high 65.2 per cent, but facing the threat of tariffs, exports were obviously ramped up dramatically in the first quarter. This jump will prove temporary, but the underlying situation should give cause for concern.

The concentration risk is also manifested in the contribution of US companies to direct and indirect employment, and in income and corporation tax revenues. While US FDI will obviously have to remain a key part of the FDI model, the US is no longer a reliable and predictable partner. This may change in the future in a post-Trump world, but then again it may not. Either way, Ireland needs to expand and diversify its external trade and FDI relationships. We must explore more aggressively what can be achieved in regions such as Asia, the Arab World and Canada. It should also force us to aggressive tackle the creaking and inadequate energy and water infrastructure; public services such as health and education; and the worsening housing situation.

The other positive could potentially be a total change in the policy approach of the EU Commission. It is now almost a year since the Draghi report was published, which was a damning indictment of the EU, and it presented a strong sensible pathway forward. Unfortunately, up until now nothing much has changed in that year. However, in the face of the existential threat from Trump, Ursula von der Leyen is seeking to significantly overhaul the EU budget. This overhaul would include a €200 billion competitiveness ‘superfund’, which she believes is essential to keep up with, or catch up with, the US and China.

The EU budget is a €1.2 trillion seven-year budget (multi-annual financial framework) which is divided between three general areas – farmers, poor regions, and research, diplomacy, and administration. Von der Leyen has wanted to add a fourth budget category for some time, which is a ‘European Sovereignty Fund.’ This initially was in response to Biden’s Inflation Reduction Act, which entailed massive spending on green energy, infrastructure and much more besides. Now of course the need for such a fund is dramatically heightened by the policies of Trump, and the stagnant Euro Zone economy, and fresh defence imperatives.

Von der Leyen has faced massive opposition from member states in the past, which is the way of the EU, but now a semblance of sanity might prevail at last. Europe needs to do it, and to do it fast. The Commission is also preparing a number of initiatives to cut red tape for start-ups and hopefully position Europe as the best place for technology driven countries.

It is often in the face of extreme threats that people do the right thing. Hopefully, Trump will provide the required incentive to the EU to fundamentally alter its model.