During the bubble years before the crash of 2008, Ireland’s State debt was comfortably below the European norm and there were occasional budget surpluses.

The State could borrow freely when needed, and at affordable interest rates.

It all went pear-shaped with the banking bust and in just two short years the country was unable to finance itself, requiring its first-ever IMF rescue programme and the party was over.

Transient tax revenues evaporated, especially stamp duty from the property bubble.

The Government’s loose budget policies, despite warnings, deepened the crisis.

Contrary to popular recollection, the principal casualty of the subsequent tightening was not current spending.

The rates of payment of the principal social transfer schemes were maintained, but the capital programme was halved in volume by 2014 and has only lately recovered to pre-crash levels.

There are persistent infrastructure deficits across the board and every reason to avoid adventurism in budget policy which risks a repetition. Ireland faces double jeopardy whenever the Trump administration settles on the details of the “America First” policy.

Tariffs would hurt directly but there is a separate threat from decisions yet to emerge about corporation tax, which could have devastating effects even if the tariff threat diminishes.

Tariff impositions on exports to the USA will not damage all EU members equally – some are far less reliant than Ireland on sales across the Atlantic.

The exposure of exporting sectors will depend on the tariff measures taken, as yet unclear.

Special deals

There can be no special deals for the various European countries, with the possible exception of the post-Brexit UK, since the EU is a full customs union and the US tariff schedules will apply to each member at the same rates.

Ireland may not care if there are high American tariffs on cars and trucks, bad news for the big economies in continental Europe, while pharmaceuticals and medical devices matter more in Ireland.

But the greatest exposure may not be the tariff war at all.

Even if the protectionist threat fizzles out, the Irish public finances could take a big hit from unilateral changes to the US corporation tax code, an issue with which Donald Trump and his advisers are fully familiar, since they made some important changes during his first term in 2017.

The recent run of budget surpluses in Ireland is due to unexpected corporation tax revenues rather than to cautious management.

The general election last November followed the once-off gift of €13 billion in back taxes from Apple, some already spent with more promised in ongoing commitments in the new Programme for Government.

The promises continue post-election, most recently from Tánaiste Simon Harris on military spending.

Advice to the new ministers from the Department of Finance has echoed earlier warnings from the Irish Fiscal Advisory Council and Central Bank that the tax bonanza could be coming to an end.

Of the extra taxes rolling in, estimates of the amount at risk of disappearance range up to €10 billion, every year and forever.

The Apple money which helped to spark the current bout of Exchequer generosity was unrepeatable, a once-in-a-lifetime lottery win, committed largely to spending promises and tax give-aways which are presumed to be permanent.

The Trump administration is committed to reducing the federal deficit, running at around 6.5% of GDP for 2025.

The measures taken in 2017 provided for a reduced rate of tax for corporations on whatever portion of their net income could be attributed to earnings from intellectual property deployed abroad.

Irish tax law, including the network of double-tax agreements with other countries including tax havens, permits US companies to pay lower taxes here and they have been doing so, hence the temporary bonanza in Ireland’s tax receipts.

Even if none of these companies re-locates back to the USA because of tariffs, or if tariffs are never imposed, the US is free to unilaterally grab the tax revenue back.

Some of the companies will begin to see their depreciation write-offs on intellectual property now located in Ireland die away anyhow, starting soon, and the US could just make all US companies pay the same rate, eliminating the effective discount that helps fuel the bonanza here.

This could accompany Trump’s desired reduction in the overall rate of corporation tax in America, with some of the cost defrayed by taking money from the Irish Exchequer.

What’s not to like? It would be naive to imagine that the Trump team are unaware of the possibilities – Secretary of Commerce Howard Lutnick has criticised Ireland on this precise issue.

Thus Ireland is more exposed than our EU partners on tax as well as on tariffs – no continental EU country has as many big US corporate taxpayers.

In the circumstances, no comfort should be taken from the appearance of improvement in the public finances.