Is Donald Trump still the UK and Ireland’s ‘American friend’?

Since Winston Churchill, the United Kingdom has always nurtured a “special relationship” with the United States, regardless of who is in Downing Street. In Ireland’s case, its economic survival has depended to a large extent on things going well on the other side of the Atlantic. What counts most for Dublin are decisions by the White House or the U.S. Treasury impacting domestic rather than international politics. The arrival of Donald Trump, with his unpredictability and disruption, has unsettled both countries.

The Irish fear the possible end of the taxes it gets from U.S. multinationals that chose Ireland as their corporate headquarters in the EU. In London, with a Labour prime minister ideologically opposed to the Republican president, and Brexit severing its ties with the EU, fears of isolation abound.

“The United States is the U.K.’s most important bilateral foreign, security and defense partner,” according to Professor Richard Whitman, an analyst at the think tank U.K. in a Changing Europe. “Since the Second World War, successive British governments have intertwined the U.K.’s intelligence, security and defense capabilities with those of the U.S. This is seen as bringing significant benefits for Britain. But it has also meant accepting constraints on the U.K.’s autonomy. The foreign, security and defense policy choices and actions of a new Trump presidency will consequently have a direct bearing on the U.K.,” Whitman concludes.

The EU market continues to account for more than 50% of U.K. exports and imports. But from an individual country-by-country point of view, the U.S. represents the main destination for British exports with over €70 billion ($73 billion) in goods, and almost €150 billion ($157 billion) in services.

Trump’s threat to increase tariffs on products from Europe — and for the moment the warning includes the U.K. — would mean a 0.7% reduction in British GDP during 2025, according to a report by the National Institute of Economic and Social Research. Quite a blow for a country with frozen growth (0.1% during 2024) and for a Labour government that is watching public debt soar while the markets back off.

Paradoxically, there are many voices urging a rethink on Brexit, which both Labour and Conservatives appear determined to ignore.

A contested ambassador, a disputed island

Despite the close ties that Karen Pierce, the current U.K. ambassador in Washington, forged with Trump’s entourage, resulting in a cordial dinner in New York between the British PM, Keir Starmer, and Donald Trump prior to his election, Starmer has decided to appoint a new ambassador, and has chosen a controversial character: Peter Mandelson, a minister with former PM Tony Blair and former EU trade commissioner, nicknamed “the Prince of Darkness” for his behind-the-scenes political clout.

Although the Starmer government calls it mere speculation that Trump will reject Mandelson, a politician who once defined Trump as “very close to the idea of a white nationalist and racist man,” it’s a very real possibility. Chris LaCivita, who ran Trump’s election campaign, has defined Mandelson on social networks as “an absolute cretin.” The British politician’s conciliatory position on China clashes head-on with that of the new U.S. administration.

Trump has already made it clear that he aims to dismantle the commitments made by the Joe Biden administration, and has already set to work on that particular mission. One such commitment concerned a U.S.-U.K. decision to hand the Chagos Islands back to Mauritius. Last October, Starmer announced he had managed to end a historic international dispute concerning the archipelago in the Indian Ocean. In exchange for the Chagos Islands being returned to Mauritius, the U.K. and the U.S. would keep hold of the joint military base on Diego Garcia Island in the southern part of the archipelago for at least 99 years.

However, the new U.S. foreign policy chief, Marco Rubio, has already warned that he considers this agreement “a serious threat to the national security” of the United States, by “jeopardizing the U.S. military position in the region.” This is due to the fact that Mauritius has strong ties with China and India.

Ireland’s taxes

Ireland cannot be understood without the United States. The island has 6.6 million inhabitants — 4.75 million in the republic, and 1.8 million in the British territory of Northern Ireland. Nearly 35 million Americans claim to have Irish origins. Ireland is the only European country where there is a U.S. border control at its airport. Thus, it is possible to travel from Dublin to Chicago or Kansas City, for example, as if it were a domestic flight.

The advantageous Corporate Tax (12.5%) that Ireland has been charging for years to tech multinationals has turned Dublin and Cork into the European corporate headquarters of giants such as Apple, Meta and Google. In 2024 alone, the revenue generated for the public coffers was €28 billion ($29 billion), 18% more than the previous year — not counting the back payment in tax that the European justice system forced Apple to pay, which contributed an additional €14 billion ($14.7 billion).

The decision announced by Trump to withdraw the U.S. from the 2021 OECD agreement, which imposes a minimum corporate tax of 15%, as well as to respond aggressively to those countries that impose extraterritorial taxes on U.S. companies, is unsettling for the new government in Dublin, still engaged in forming a coalition.

“It is important to note that while taxes are important, they are not the only factor attracting foreign direct investment to Ireland,” said the Irish Department of Finance, in anticipation.

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