Ireland’s Export-led Economy Looks Robust Enough to Withstand Higher US Trade Tariffs for Now
If the 15% tariff regime proves durable, companies in sectors crucial for the Irish economy – aeronautics and pharmaceuticals – are unlikely to move production facilities out of Ireland given the country’s favourable business environment.
Relocating production would encounter several strategic, operational and regulatory hurdles for companies, underpinning Scope Ratings (Scope)’s view that the country’s EUR 1trn stock of foreign direct investment is likely to remain in these high value-added sectors.
Still, some uncertainty surrounds the pharmaceuticals sector given there is a US investigation into a possibly higher sector-specific tariff that could disrupt supply chains and investment in research and development.
While the preliminary US-EU deal lacks detail and requires the approval of EU member states, it does lower the risk of a full trade war involving EU retaliation with reciprocal tariffs on US exports, including digital services, which are an important sector for Ireland.
However, the shift in US trade policies has shown the vulnerability of the Irish economy’s exposures to US markets and multinational enterprises (MNEs), emphasising the urgency of domestic structural reforms and investments to compensate for more volatile trade relations and protect public finances.
Figure 1. Ireland’s government debt remains on a downward trajectory
Source: IMF, Scope Ratings. *GNI = modified gross national income; a measure of the size of the Irish economy excluding distortions related to the activities of MNEs.
Ireland’s wealthy economy and robust fiscal position, supported by exceptionally strong corporate income tax receipts, anchor Scope’s AA rating for Ireland with Stable Outlook.
Corporate tax revenue reached EUR 39.1bn (36% of Exchequer revenue) in 2024, up from EUR 29.3bn in 2023, bolstered by a one-off EUR 14bn payment by Apple to the government following a court ruling. Corporate tax is expected to remain substantial at EUR 29.3bn in 2025 (28% of revenue) and EUR 28.1 bn in 2026 (27%), tariffs notwithstanding.
Scope expects the general government budget to remain in surplus, running this year at around 2.6% of GNI* (a measure of the size of the Irish economy excluding distortions related to the activities of MNEs) and around 2.3% on average between 2026-30. Notably, without excess corporate tax revenues, the general government budget would be in deficit by around 1% to 2% of GNI*.
While dependence on MNEs remains a key economic vulnerability – just 10 companies pay 57% of all corporation taxes and just three account for 40% – robust corporate-tax income and economic growth underpin the favourable trajectory of government debt.
General government debt-to-GNI* is likely to decline to 63% in 2025 and to less than 50% by 2030 from 68% in 2024, with government debt-to-GDP falling to 30% from around 40% over the period (Figure 1).
The government’s strategic approach to windfall revenues strengthens the fiscal outlook through the two sovereign funds established in 2024. Although transfers only account for a relatively modest portion of windfall corporate tax receipts, sovereign funds provide a buffer for addressing the pressing structural challenges facing the economy.
Assuming the government transfers around 0.8% of GDP a year to the Future Ireland Fund through 2040, the Fund could grow to around EUR 100bn, allowing future governments to draw down investment returns from 2041 onwards to tackle the health and welfare costs associated with an ageing population.
The government is also accumulating resources for the modernisation of infrastructure and to address climate change with EUR 2bn of annual flows to the Infrastructure, Climate and Nature Fund from 2025-2030.
Scope’s assessment of Ireland’s favourable refinancing profile further supports the fiscal outlook, with less than 40% of outstanding Treasury debt maturing within five years and a weighted average Treasury debt maturity exceeding 10 years. The National Treasury Management Agency’s cash balance of EUR 30bn (around 5% of GDP) provides further substantial financing flexibility.
Eliminating supply-side bottlenecks remains a significant policy challenge, with the economy operating at capacity while facing labour and skills shortages.
The government’s updated National Development Plan includes EUR 102.4bn in capital investments between 2026 and 2030, with overall investments of EUR 275.4bn by 2035, but execution risks remain elevated given the tight labour market and lengthy processes.
Addressing these supply-side constraints through labour-market reforms will be crucial for the economy to absorb the ambitious infrastructure spending on housing, water, energy and transport.
Over time, implementation of the National Development Plan could enhance the growth model and support competitiveness, while mitigating the economy’s exposures to global shocks as a small, open and financially inter-connected economy.
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Thomas Gillet is a Director in Sovereign and Public Sector ratings at Scope Ratings. Elena Klare, analyst in sovereign ratings at Scope, contributed to drafting this research.
