Dr. Paul Egan, an economist at ESRI, suggests that if 25% tariffs target the EU, the European Central Bank (ECB) might raise interest rates between 1% and 1.5%. These shifts could influence mortgage repayments and savings rates, depending on how local banks react. The imposition of tariffs is likely to cause tariff-driven inflation in the eurozone. Additionally, the uncertainty surrounding these events complicates economic predictions, posing risks to both inflation control and economic growth, with a pronounced negative impact on the Irish economy and households coming off fixed-rate mortgages.
If reciprocal - or what we call 'tit-for-tat' - tariffs are imposed on imported goods from the US then the knock-on effect of that is tariff-driven inflation across the eurozone and that will have implications for the path ECB interest rates take.
The ECB will face a difficult trade-off between moderating inflation and supporting economic activity.
What we have shown in this report is that there is a negative impact on the Irish economy and the average person in Ireland, based on these tariffs.
One thing we can't account for in the model framework is the impact of uncertainty... one thing that economists don't like is heightened uncertainty because that can magnify impacts in the short run.
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