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Ahead of Trump arrival, Ireland's finance minister sounds trade warning

Key Points
  • Ireland's finance minister says his country's open economy is at risk to the effects of a trade war.
  • Paschal Donohoe tells CNBC that domestic demand is improving to help stabilize economic balance.
  • President Trump arrives in Ireland on Wednesday to meet with prime minister Leo Varadkar.
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Donohoe: Want trade that's mutually beneficial to US and Ireland

The finance minister of Ireland conceded that his country's economy is at risk to the effects of a trade war between the likes of the EU, the U.S. and China.

Paschal Donohoe told CNBC's Willem Marx Wednesday that the country's open and globalized economy does leave it exposed to unpredictable taxes and tariffs.

"Anything that happens in global trade does have an effect on the performance of our economy and there is a vulnerability that could develop into the future," Donohoe said.

President Donald Trump will arrive in Ireland later Wednesday to hold talks with Prime Minister Leo Varadkar. The two are expected to discuss a range of issues, including Brexit and trade.

Donohoe said he expected Varadkar to spell out to Trump that U.S. exporters looking to sell in Europe, or in other parts of the world, would find Ireland an attractive place to set up base. The finance minister said evidence of this trend was already underway.

"Since the focus on President Trump's trade policy has grown, we have actually seen more international investors and companies wanting to be here in Ireland."

Donohoe added that the Irish leader would also look to strengthen its labor presence within the U.S.

"We want to look at how we can deepen Irish investment and job creation in America over the coming years," he said.

Ireland and Brexit

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Donohoe: Disorderly Brexit presents key challenge for Irish economy

The role and geography of Ireland has been crucial to the labored progress in Brexit talks.

Northern Ireland, which is part of the United Kingdom, shares a border with the Republic of Ireland, which will remain part of the European Union. Erecting a border to regulate the passage of people and goods is controversial, and potentially illegal, due to the conflict in Northern Ireland in the late 20th century.

European and U.K. officials have said they are committed to avoiding the return of a "hard border," involving physical checks or infrastructure, after Brexit.

The risk that Britain now leaves the EU with no deal has grown as the terms of departure have failed to satisfy enough U.K. lawmakers.

But with a new U.K. prime minister soon to be elected from a field of Conservative Party candidates, Donohoe warned that a new face does not guarantee any breakthrough.

"We do need to point to the fact that a new British prime minister will have to deal with many of the constraints that Prime Minister (Theresa) May had to deal with," he told CNBC.