US border tax would be 'alarming' but unlikely for Ireland, says expert

Speaking at a Limerick Chamber briefing, Carl Tannenbaum said that the proposed border tax is a way of promoting export out of the US

A leading international economist has assured Irish business interests that the likelihood of a border tax to transform the US into potentially the world’s biggest tax haven is “very modest”.

Addressing a Limerick Chamber briefing event, Chief Economist for financial services company Northern Trust Carl Tannenbaum said that the likelihood of a border tax passing is less than 25%.

The Northern Trust Executive Vice President said that the proposed border tax is at its heart a way of promoting export out of the US and disadvantaging import into the US. 

“It would prospectively turn the US into the biggest tax haven on the face of the earth. And of course in this part of the world, which has made a lot of headway by having corporate friendly policies, this is alarming.

“The good news is that for Ireland and the UK and perhaps the bad news for the US, the likelihood of this is actually very modest. At first level, it violates world trade rules,” he said, adding that the one thing everyone wants to avoid is a trade-war which no one would win.

"The political likelihood of a border tax passing is less than 25%. My conclusion from Washington is this; there has been a lot said, a lot promised but if it happens, it’s going to happen later than a lot of people think and it may be smaller than promised. In the context of world competitiveness, I would take this as reasonably good news in this part of the world.”

Brexit

With regard to Brexit impacts, he said that there will be opportunities for Ireland as businesses looking for locations to deepen their investment will not go to a market that may not be part of the European Union. 

“I won’t speak for anyone in particular but I am certainly aware that a number of the larger companies operating globally here in this part of the world are considering locations and strategies as contingency to make sure that they can continue to serve the common market.”

He anticipates article 50 will be invoked sometime before the end of this month and we will then hear “a drumbeat of issues” that will suggest resolution is impossible but these are opening salvos only and a first step in what is going to be an iterative negotiation that will end up somewhere more reasonable.

The briefing explored the prevailing economic environment and how it is going to be impacted by international uncertainty through Brexit, new US administration policy change and political uncertainty across Europe.

Also speaking at the event, Dr Loretta O’Sullivan, who heads up Bank of Ireland’s Economic Research Unit said that uncertainty around Brexit and the US is weighing on the minds of business and householders. 

“With Brexit the rhetoric at the moment is around a hard Brexit. There’s a negotiation process to be gone through and what is key is the nature of the trade relationship that comes out of it. But there are also some opportunities, particularly in the FDI space and some potential relocation of activity to Ireland which requires us to be agile and look to exploit,” she said.