US trade wars will wipe off 1.1% of Portugal’s GDP over three years

The Bank of Portugal has estimated that the current adverse international economic scenario and the impact of the ongoing US tariff wars could wipe 1.1% off Portugal’s economy over the next three years and reduce Portugal’s growth from 2.3% to just 1.4% this year.

In its Economic Bulletin for March, the BoP forecasts that the tariffs coming on line from the second quarter of this year will lead to a GDP reduction close to 0.7% in three years time and even worse in 2025.

However, factoring in continued global uncertainty fueled by two wars – Ukraine and Middle East – an environment of uncertainty makes things worse – by as much as 1.1%.

This would be the result of the negative repercussions from a loss of confidence from companies and economic agents on future commercial policies and plans.

The scale of the tariffs and how long they will last creates a lack of confidence and volatility in the market, causing production costs to rise and, as a consequence, inflation on the price of goods.

In this adverse scenario the BoP estimates that the Portuguese economy will grow only 1.4% this year and 2.3% next year.

In 2026 the impact will, however, be less: in this scenario Portugal’s economy will grow 1.7% instead of the 2.1% forecast. However, by 2027 the economy should grow an extra 0.2%, bringing the estimate to 1.9%.