Much like the Brexit vote in June of this year, the election of Donald Trump as the 45th President of the United States was not altogether expected.
For Ireland as a small open economy closely bound to both the UK and the US, culturally and economically, these events represented a seismic change to the world in which we operate causing uncertainty which could not have been anticipated at the start of this year.
The issue to the forefront of our minds following the US election result concerns that of US companies who operate in Ireland, the jobs they provide and the billions of Euro of tax revenues which they generate. A constant refrain throughout Trump’s campaign message to ‘Make America Great Again’ was his intention to repatriate jobs and profits which he said had been lost overseas (including to Ireland) and which, he said, rightfully belonged in the US. This message had strong appeal in the parts of America which had suffered economically due to the decline of its once powerful industrial sector and ultimately contributed largely to his election.
A cut in the US corporation tax rate has been positioned as a key tenet of his economy strategy in achieving this. Currently at 35%, Trump has stated that he ultimately wants to bring it down to 15%, which is a great deal closer to our headline rate of 12.5%.
However, while our corporation tax rate has played a key role in attracting US companies to locate in Ireland, there are other parts to our attraction, including our well educated English speaking workforce and our geographic position offering easy access to the European market.
US companies looking to establish or maintain a location for their European, Middle East and African (EMEA) headquarters will still look to Ireland even allowing for a reduction in the corporation tax rate back home. When it comes to US companies choosing to maintain a presence in Ireland, we are competing more so with other European countries than with the US. And that is why we should probably keep a closer eye on the reducing corporation tax rate in the UK and not necessarily the rate in the US.
If a lot of what Trump said during the course of his campaign was to be believed, America is facing into an era of protectionism and isolationism as it turns inward and away from the world. He spoke of rewriting trade agreements, withdrawing from NATO and appears to be set fair on a collision course with China over its economic practice.
All this and more has contributed to the belief that a Trump presidency will have a very unsettling effect on the world’s economy.
Now that he is in power however, Trump is faced with the reality of being in office and the inherent difficulty in the US of putting in to action what has been promised. The fact that the Republican Party has a majority in both Congress and the Senate should not be seen as giving Trump carte blanche to do as he pleases as there are enough Republican dissenters within both houses to put a check on him, especially if he seeks to implement some of his more outlandish promises from his campaign.
He may soon come to learn that while you campaign in poetry you govern in prose – a reality that he may well have expected any way.