At the heart of the economic dialogue that hopefully will unfold in a positive frame over coming months and years are a number of assertions that are coming from the White House that question the fairness of the relationship - to the United States.
No matter what one thinks about the diplomatic tone and style of the exchanges coming from this Trump II administration in Washington it would seem fair, for the EU, and by association, Ireland, to make every attempt to read behind the bluster and examine the sources of Washington’s ire and discomfort about the fairness, or lack of it in the global trade architecture of 2025.
In this will lie a resolution of the undoubtedly heated trade wars that have broken out, following the initial skirmishes with Canada and Mexico.
Martin’s strategy was to emphasise the reciprocal benefits of the relationship, highlighting in the process the key economic facts that bilateral flows in the economy consist not just of merchandise trade, but current account balances that include revenue from services trade, and, crucially to the US-Ireland economic nexus, capital account movements. (See:here). These include profit repatriations from Ireland to US companies, licence fees, and royalty payments (all detailed in the Irish balance of payments statistics compiled by the CSO).
The truth is that Ireland has adopted an economic model that embraces many of the hypotheses associated with the economic policies that have been long associated with one of President Trump’s Republican predecessors, Ronald Reagan. It is no accident therefore that President Trump in his engagements with Taoiseach Martin in Washington at several points referred to the ‘cleverness’ and success of the Irish economic strategy over the years. That Reaganite model has been described as ‘Reaganomics’, which, according to a Wikipedia definition, consists of the following “The pillars of Reagan’s economic policy included increasing defense spending, balancing the federal budget and slowing the growth of government spending, reducing the federal income tax and capital gains tax, reducing government regulation, and tightening the money supply in order to reduce inflation”.
While the inclusion of defence spending as an essential element of an economic policy model might be questionable, it certainly would be appropriate to include a commitment to free, and fair, trade an essential, indeed foundational, element in the mix (missing in the above definition).
We have President Reagan himself to cite as evidence for this. Ronald Reagan explicitly railed against tariffs in this speech, delivered in 1985, and which went ‘viral’ again in the first weeks of 2025.
Reagan’s emphasis on fair trade is significant, and in this may lie the germ of the resolution and aversion of erupting trade tensions between Europe and the US, and indeed other partners, including Canada, and others.
'Throughout the world, there is a growing realisation that the only way to prosperity for all nations is rejecting protectionist legislation and promoting free and fair competition' - Source: President Ronald Reagan's radio address on Free and Fair trade April 25, 1987.
The set of economic policies currently in the process of being adopted (developed?) by the Trump II administration do not equate to Reaganomics. Using a more recent moniker ‘Maganomics’ (a term only recently in use, and nothing like as coherent as the above definition of “Reaganomics”) there already are many respects in which it differs. Some of these are listed in the table above. The second panel, identifying some “Ireland-USA historial parallels that rhyme” provides a number of examples drawn from the economic history of both countries that will bear particular significance to the evolution of the commercial and financial relationships between the two countries in 2025 and beyond.
All or a combination of the ideologies listed in panel one above, and labelled here as ‘medieval economics’ have been shown to result in bad economic consequences, the most serious of which was the global depression of the 1930s.
Any combination of these, if followed, have the potential if pursued to their nth degree to lead to a depression, or worse, such as wars. They memorably did in 1939.
Tit for tat actions involving tariffs, combined with human emotions amongst statespersons, such as anger and stubbornness, not to speak of the existence of actors who are downright evil, clearly gives grounds for the current sky high ranking of the global uncertainty index.
We can take some solace from the fact that the originating source of much of the current disturbance of global equilibrium comes from the Oval office and that is from a country, with an historical democracy that has a system of checks and balances rooted in the system formed by Madison and the founding fathers.
However, the real world is run by people, not systems of Government. People are capable of reactions and responses led by personality and psychological factors. Stubbornness, arrogance, petulance and anger could combine in dangerous ways. There are multiple personalities in charge of big economies now with unknown connections and relationships amongst them that could influence any outcome.
This is indicated by markets - the US market in particular. Equities have fallen, bond yields have risen. This is an indicator of potential recession on the horizon.
The checks and balances of Madison and his contemporaries, and which were incorporated in the Founding documents of the American Republic, have gone on to frame liberal democratic Constitutions around the world.
Indeed, the architecture of this US Constitution and Republic, have been the template for the European Union itself a model that self consciously had been evolved over the past 60 years in the image of the United States of America.
It is ironic, indeed, that President Trump has been asserting in some of his rhetoric that the EU was set up to ‘screw’ the US. The EU’s establishment also was, in copying the US model, a complement to it. In the light of this, it seems most sensible, common sensible, indeed, to coin another term beloved of the Trump II administration, (‘common sense’ echoing the pamphlet of Thomas Paine, another great American founder), to look for areas of cooperation in the re-working of the global, transatlantic trade partnership.
In the meantime, working away, there will be another modern ‘check and balance’ mechanism to the actions of the Trump II administration - the markets, specifically the US public equities markets, as measured by the Dow, S&P and Nasdaq indices. Add the public and corporate bond markets, and you have a formidable jury in the form of the markets sitting in judgement, and working in real time.
To cite another recent historical parallel, the demise of UK Prime Minister Liz Truss, it was the adverse movement of the UK gilt (Government bonds) market that led to her exit after just 50 days as Prime Minister in 2022.
While an early demise of the Trump Administration is not on the cards there is every likelihood that will modify its actions and policies if the markets continue to blink red in response to actions on the tariffs or foreign policy fronts for Washington. President Trump himself has always been a close follower of Wall Street trends, hence there should be little doubt that the Administration will be (will have to) monitor market movements.
By mid March 2025, the market already had given up all of the gains arising in the equity markets from the ‘Trump bump’ following the initially euphoric reaction in markets following the President’s re-election on November 5th 2024. The erosion continued as concerns arose regarding the extension of the trade war beyond Mexico and Canada, specifically to the EU with the emergence, in particular, of strains in the corporate bond market.
It can be expected therefore that markets, including the corporate bond market, traditionally relatively stoic compared with the more volatile public equity markets, will provide an increasingly effective check on the policy actions of Washington.
It is clear that if a fully fledged trade war between the United States and its closest allies is to be averted there should be meaningful engagement between the EU and the US that goes beyond mere transactional negotiations regarding reciprocal tariff rates.
It will need to get beyond the surface hype to address the real issues that lie at the heart of the American sense of grievance, and, indeed, inferiority that seem to reside there regarding the EU. After all, the EU has more people, for one, than the USA, and it certainly is economically stronger than the devastated and war ravaged continent of 1945 that the US liberated, and subsequently helped rebuild, through the Marshall Plan.