Summary:

U.S. is Portugal's 4th largest export market with 6.8% of total exports.
Tariffs could lead to a cumulative GDP reduction of about 1.1% over three years.
Five vulnerable sectors identified: Textiles, Non-metallic minerals, Beverages, Electronics, Leather.
Companies may need to reduce prices or shift production to the U.S. to mitigate tariff impacts.
A globalized economy means indirect effects on companies not exporting directly to the U.S.

The Potential Impact of Trump's Tariffs on Portugal

Tariffs Impact

The United States is one of the main destinations for Portuguese exports, ranking as the fourth largest client of Portugal. But what will be the impact of Donald Trump's tariffs on our economy?

According to economist Gabriela Castro from the Bank of Portugal (BdP), the U.S. represents 6.8% of Portugal's total goods exports in 2023. The AICEP (Agency for Investment and Foreign Trade of Portugal) states that, in January this year, the U.S. was Portugal’s 11th supplier. In 2024, Portuguese exports to the U.S. amounted to €5.318 billion, with imports increasing by 7.3% to €2.416 billion, resulting in a positive trade balance of €2.902 billion.

Chemicals made up 24.9% of total sales to the U.S. in 2024, totaling €1.324 billion. Other significant exports included mineral fuels and plastics.

A Comparative Analysis of Export Dependency

Portugal's dependence on U.S. exports is moderate compared to other EU countries. In 2023, Portuguese goods exports accounted for about 2% of GDP, while countries like Cyprus and Malta had significantly lower percentages at 0.4% and 0.6%, respectively. Conversely, Belgium and Ireland showed much higher dependencies at 5.6% and 10.1%.

The Economic Impact of Tariffs

It is still too early to predict the exact impact of Trump's 20% tariffs on imported goods from the EU. The BdP's March Bulletin projected a cumulative GDP reduction of about 1.1% over three years, with effects concentrated in the first two years. The report highlighted that tariffs would create an environment of uncertainty, negatively affecting economic confidence and leading to a decline in investment and private consumption.

Five Sectors Most Exposed to Tariffs

The BdP identified five sectors in Portugal that are particularly vulnerable:

Textiles
Non-metallic mineral products (including glass and ceramics)
Beverages
Computer and electronic equipment
Leather products

Each sector's impact will vary depending on individual company circumstances and their preparedness for these tariffs.

Strategies for Businesses

Exporting companies may mitigate the effects by reducing their selling prices, thus compressing their profit margins. Multinational companies might consider establishing production facilities in the U.S. to align with Trump's industrial recovery strategy. Additionally, even companies that do not export directly to the U.S. can still be affected indirectly due to the globalized nature of production. For instance, the automotive industry could face decreased demand for components manufactured in Portugal, affecting the overall economy.

Impact on Sectors