In its latest health check for the Irish economy, aptly named “Dodging Bullets,” Dublin-based broker Goodbody warned Ireland that it would face major policy issues if Trump decided to implement aggressive tariffs on the EU and cut corporation taxes in the States.

Ireland runs a goods trade surplus with the U.S., owing mainly to pharmaceutical exports, while it runs a heavy services trade deficit of €134 billion ($140 billion) with the country, in part a result of royalties and licenses, registered in Ireland, being repatriated to the States.

Ireland’s links to the U.S., combined with the range of measures Trump could level against his ally, mean Ireland must prepare for several outcomes, drawing Goodbody’s comparisons with Brexit.

“Under the new US administration risks are skewed to the downside, including tariffs and corporate tax changes, but there are potential upsides too from better US dynamism and increased profitability from US firms based in Ireland,” said Goodbody chief economist Dermot O’Leary.

Trump has threatened to level significant tariffs on the EU as part of a ramp-up in protectionism against its long-term ally. 

Ireland is also exposed to corporation tax. The country’s top 10 corporation taxpayers account for 56% of its total revenues. If the U.S. cuts its own corporation tax, there are fears it could lead to more U.S. companies returning home.

In addition, Trump has discussed the onshoring of critical industries, of which pharmaceuticals could be counted. U.S. pharma groups, including Pfizer and Medtronic, are major employers in Ireland.

Goodbody tempered this argument by pointing out that Ireland’s close economic, cultural, and political links to the U.S. could result in the country being selected for “friend-shoring,” in which ideologically aligned nations trade with each other.

The numbers underlying Ireland’s dependency on the U.S. are stark, leading Goodbody to label Ireland the “51st State” from an investment perspective. 

U.S. companies account for 10% of private employment in Ireland, while America makes up 72% of foreign direct investment in the country, both well above EU averages.

Ireland has attracted U.S. tech giants since the mid-2000s with highly competitive rates of corporation tax. Microsft, Apple, and Google are among the companies that have set up their European headquarters in the country. Combined, those three companies employ nearly 16,000 people, according to analysis from Goodbody.

The country reluctantly accepted a €13 billion fine levied against Apple by the EU for backdated taxes. The tax windfall, which added to Ireland’s massive budget surplus, increased anxiety about the future of Ireland’s tech competitiveness in the EU. 

Amidst growing uncertainty about Ireland’s relationship with the U.S., Goodbody’s O’Leary says the country should focus on building up its sovereign wealth fund and commit to increased spending on infrastructure, which is in desperate need of an update.