It is all relative, and all relatively uncertain.

Tariffs are coming for the European Union. No one knows what form they will take. No one. Not the EU negotiators, their US counterparts, not even the US president. 

No one has any sense of the final form the deal will take. It has been widely reported that a deal was in the offing last week before President Trump’s threat to impose blanket tariffs across the EU. 

Given his previous actions, we can assume this announcement is little more than posturing, but it forces the European Union to posture too. We learn the EU is drawing up its list of sectors to tariff, some of which will hurt Irish interests as tech companies experience large increases in the taxes they pay. 

Tariffs are not just taxes on a domestic population. They act as brakes to investment. Firms react to uncertainty by stalling future spending on plant, equipment, and most importantly, on R&D. The true cost of uncertainty is this extraordinary loss of potential. 

If tariffs land, they will first be felt as a sectoral shock, to dairy, or whiskey, or ICT, depending on their relative US exposure. They will then be felt as a fiscal shock. 

In the past week, the Taoiseach, Tánaiste, and Minister for Finance were at pains to frame Budget 2026 as a prudent response to this uncertainty. No cost-of-living package, even as the State grows inevitably larger to serve the needs of its growing, ageing population. No post-election largesse ensures the Government will ship serious political damage. 

The Dáil this week heard moralising from the Social Democrats accusing the Government  of “moralising” on fiscal responsibility, even as the ESRI urged a focus on increasing spending while keeping spending down. 

The Government must do what it always does during budget periods, and distribute the unhappiness equally. Ministerial kite-flying ahead of the publication of the Summer Economic Statement and the National Development Plan (NDP) review in the coming days suggests tighter current spending mixed with unabated investment in much-needed infrastructure. 

The CEO of a public infrastructure multinational visiting Dublin last week received a sneak peek of the NDP review from ministers and was positively salivating at the expected volume of contracts.

Reversing the 6.5 per cent increase in government expenditure recorded in the first half of this year (in line with previous years) will be politically difficult, as illustrated by the opposition’s assault on the coalition over the end of once-off cost-of-living measures in the final days of the Oireachtas session before the summer recess.

A lot will happen between the budget’s scoping exercise through the coming week’s Summer Economic Statement and NDP review, and budget day itself in October – most notably the expected clarification of the new transatlantic trading environment from next month.

Time is our friend when it comes to tariff imposition. 

The inflation data in the US is starting to show. In June, US headline inflation rose at an annual rate of around 2.7 per cent, slightly above market expectations. Core inflation is running at 2.9 per cent now. Signs of tariff-driven inflation are building across key categories, suggesting that broader price rises may be baked in. 

Relative tariff imposition also matters. If the UK has a general tariff of 10 per cent, and the EU has a general tariff of 20 per cent, Irish firms start on the back foot, every time, relative to their UK competitors, especially when you factor in the dollar’s slide in value.

Whiskey is a prime example of this situation. Irish whiskey manufacturers would be competing directly against their counterparts in Scotland for a cut of the lucrative US market, but would be doing so with a structural economic disadvantage.

Already, a string of distilleries have introduced production stoppages this year, whether temporary at large players like Diageo and Irish Distillers, or as part of insolvency proceedings hitting smaller businesses including Powerscourt Distillery in Co Wicklow and Killarney Brewing and Distilling Company in Co Kerry. 

This, too, may have deeper fiscal implications for sectors needing support. It is all just too uncertain to see what, who, where, and how much. 

But we know the stakes are high. 

The ESRI has warned that US tariffs will trigger a slowdown in exports and lower-than-expected growth over the next two years. The think-tank modelled the likely impact of a 25 per cent bilateral tariff on all EU-US trade.

Under this scenario, the Irish economy, as measured by modified domestic demand (MDD), would expand at a slower-than-expected rate of 2.8 per cent this year and 2.1 per cent in 2026. This compares with three per cent and 2.8 per cent if tariffs were not applied.

The public finances have shown remarkable resilience over the last number of years. But we can’t be complacent. The country’s small, open economy has long been its strength, but that very openness leaves it acutely vulnerable to external shocks like those posed by US tariffs.

The Central Bank has crunched the numbers under different scenarios. 

In its baseline scenario, which involves 20 per cent tariffs on EU goods going into the US with pharmaceuticals and semiconductors exempt, the bank predicts the Republic runs a budget surplus of two per cent in 2030.

Under a more adverse scenario, with a 20 per cent tariff being imposed on pharmaceuticals and semiconductors, with the EU retaliating with 20 per cent tariffs of its own, Ireland’s surplus shrinks to less than one per cent in 2030.

In the worst-case scenario, it predicted the State could end up with a budget deficit of four per cent, equivalent to €17.7 billion, by the end of the decade. The regulator warned of weaker corporation tax receipts and a slowdown in multinational investment.

While the shape of the final deal remains unknowable, what is certain is that Ireland must remain alert, adaptive, and united in its response. Amid the uncertainty and haze, Ireland is entering a period of heightened economic fragility.

Elsewhere last week…

The Emirates have become a global centre for boxing and MMA, attracting Irish competitors in search of a career in the limelight. But many struggle to make a living in an industry associated with alleged criminal activity. Hannah had the inside story in part three of her series From Dublin to Dubai. 

Philip Reynolds built his family’s business into a pet food giant with sales of €500 million. Now he wants to help start-ups scale or fail faster, and he’s brought in five former KPMG partners as well as his own team to help him do it. He spoke with Tom. 

A Scandinavian consortium has reached an agreement to buy Dalata for €1.4 billion. Dalata’s CEO, Dermot Crowley, explained to me why he believes the deal makes sense.

John Reynolds has an in-depth feature on Ireland’s bid for the world’s biggest chipmakers. A €30 billion fab could put Ireland on the semiconductor map — but with no diplomatic ties to Taiwan and fierce global competition, John explained how the Government’s grand ambition to be a European semiconductor superpower is one of its most challenging strategic tests in recent times.