The impact of deglobalisation and protectionism on a small open economy - The case of Ireland

The decline in international trade following the financial crisis suggests a shift in globalisation and a transformation of the international economic order. Protectionist trade policies have gained prominence as certain major economies increasingly implement tariffs to safeguard domestic industries and promote import substitution. This paper utilizes the National Institute of Economic and Social Research’s Global Econometric Model (NiGEM) and the ESRI’s macro-econometric model (COSMO) to explore the implications of de-globalisation and protectionist  trade policies for the Irish economy. Given Ireland’s small, open economy, it faces greater risks from protectionist shocks compared to larger, diversified economies. The paper examines various protectionist shocks, revealing that both tariff and non-tariff measures could significantly impact the Irish economy, particularly the traded sector. The resulting economic shifts may adversely affect the labour market, consumption, and public finances, with potential declines in personal, indirect, and corporation tax receipts.