Northern Ireland’s best hope for the Donald Trump presidency is probably that he didn’t actually mean what he said to get elected. If he did mean it, there could be seriously bad news ahead.
For many, the United States’ key role in Northern Ireland has been its support for the peace process. But in the American mind, the Good Friday Agreement of 1998 is now a very old story and peace has been cemented. Even with the Clinton family away from the stage, the old Bill Clinton adage of ‘It’s the economy, stupid’ should remain at the front of our thoughts. We should reflect on the US engagement with Northern Ireland’s economy and what Trump’s presidency means for that.
Trump’s campaign centred on the key message of ‘Let’s make America great again’, promising American jobs for American people. That argument resonated with those parts of the US population who felt they had lost out to globalisation and that they had paid the financial price for bailing-out Wall Street and the US banking industry. Hillary Clinton’s links with Wall Street were perhaps even more damaging to her than the use of a private email server for government business.
Steel workers, miners, auto workers and the unemployed voted in very large numbers for Trump and for the promise that under his leadership, US corporations would create jobs at home, not abroad. And while Trump has been criticised for being vague with many of his election promises, his manifesto on jobs and taxes seems clear.
US-based corporations are calculated to be holding about 2,000 billion dollars of profits overseas. They have not repatriated these profits to the US because of its high corporation tax rates. So Trump intends to cut the tax rate on the repatriation of those profits. That is intended to drive investment by US corporations within the US.
Trump also intends to induce US corporations to focus more on the domestic economy by reducing tax rates more generally. Under Trump’s stated proposals, the US federal corporation tax rate would fall from 35% down to 15%. The top federal income tax rates on wealthy individuals would fall from 40% to 33%.
With tax rates cut, corporations will be encouraged to focus on domestic investment. That is bad news for Northern Ireland. NI is likely to find the intended 12.5% corporation tax rate does not provide much incentive for US inward investment. Even more worrying is Trump’s threat to impose a potential 35% tax on US corporations’ imports on goods produced by their overseas operations.
Northern Ireland’s economy has done very well from US investment – Seagate, Allstate, Citigroup and Caterpillar are all very large employers. Hopefully all will stay in Northern Ireland, but no doubt each will review their investment strategies and the size of their overseas investments. The same is true of other US corporations such as Apple and Google that invest heavily in the South.
Trump supporters, like Brexit voters, gave a clear message that they do not like globalisation. Modern history suggests a cycle veering between international trade liberalisation and trade protectionism – we now seem embarked on a period of protectionism.
The risks of protectionism include tensions between nations that can escalate into war, but also that weaker economies lose out in the economic conflict. At present, Northern Ireland is one of Europe’s least resilient economies. There is a very serious threat as a result of the Trump presidency that it will become even weaker. Let us hope, instead, that Trump did not mean those apparently seductive words that he used to win the election.