Geoeconomic Fragmentation

Ireland’s economy is deeply connected to the global trade network and relies on foreign direct investment (FDI), notably from the US. This paper presents a framework to estimate the impact of geo-economic fragmentation through three channels: (1) supply chain disruptions, (2) trade distortions resulting from tariff increases, and (3) FDI relocation, including driven by tax policy changes. Our findings suggest that while the impact of supply disruptions and higher tariffs would be relatively contained under moderate shock assumptions, potential FDI relocations would be associated with a sizeable loss of value added but more limited impact on the indigenous economy.