On April 2, the President of the United States, Donald Trump, announced a massive increase in tariffs that has put governments and markets around the world on alert. Starting today, a general tariff of 10% will be applied to almost all U.S. imports. But that's not all: on the 9th, the so-called "reciprocal tariffs" will come into effect, even tougher, with a 20% tariff on exports from the European Union and up to 54% for China.
The Savings Banks Foundation (Funcas) has published a detailed analysis of how these measures will affect the Spanish economy. Although the direct impact is estimated to be "relatively limited" - between two and three tenths of the GDP - the indirect effects can be much more significant and concerning.
How much does Spain export to the United States?
Spain exports to the U.S. about 18,100 million euros per year, which represents 1.1% of its GDP. Although not a negligible figure, it is far from the dependence that other countries have on the U.S. market. Mexico, for example, exports to the U.S. approximately 419,000 million euros per year, which is equivalent to 75.6% of all its exports (25% of its GDP). Canada, on the other hand, sells products worth about 401,000 million euros, 76% of its exports (19% of its GDP).
In comparison, the Spanish economy is much less exposed. However, that 1.1% figure does not tell the whole story: many Spanish companies sell components worth around 9,000 million euros, which are then integrated into European products destined for the U.S. This raises the total value of Spanish exports to 1.9% of the national GDP.
Funcas calculates that an average tariff of 20% could reduce the volume of exports directly to the U.S. by 20%, which would subtract 0.17 points from the Spanish GDP. This is added to an additional drop of 0.08 points due to the weakening of the European market, which will also suffer from this tariff escalation. In total, Funcas estimates the loss to be between 0.2 and 0.3 percentage points of the GDP.
The damage will not be evenly distributed. Some sectors are much more exposed to the U.S. market. For example, over 10% of Spanish exports of machinery generating power, fats and oils, ships, wine, and chemicals are destined for the U.S. Other notable products include furniture, prepared foods, fishery products, dairy products and eggs, aircraft, medicines, and certain electrical and precision devices.
For these industries, the new environment could mean a strong shake-up, with loss of competitiveness and income decline.
Indirect effects: the bigger issue
Funcas warns that the indirect effects of this tariff policy are "quantitatively greater" than the direct impact on exports. Firstly, because countries like China, severely affected by U.S. tariffs, will seek new markets to compensate for their loss of market share. This could result in a commercial offensive with very low prices that would affect European producers.
It also points out that the widespread uncertainty about the rules of international trade will slow down investment. In Spain, there is a strong correlation between investment in capital goods and exports. If external sales decline, many companies may reduce or cancel investment projects, affecting economic growth.
Funcas also highlights the risk that Chinese products sold online - valued at less than 150 euros and therefore exempt from taxes in Europe - could flood the continent after the closure of the U.S. market, further damaging local industries.
Funcas points out that U.S. tariffs should not directly affect the prices paid by Spanish consumers. In fact, in the short term, products like oil or wine could become cheaper if they do not find a market in the U.S. But if these sales cannot be redirected to other destinations, companies could disappear, leading to a medium-term increase in prices with the corresponding "permanent destruction of activity."
In the event that the EU imposes retaliatory tariffs, the report states that the effect on prices in Spain "would be irrelevant." Funcas is based on the fact that Spain imports very few consumer goods directly from the U.S. More concerning would be the possible price increase if industrial inputs used by Spanish manufacturers in their production processes become more expensive.
The report also notes that Trump aims to generate enough revenue from these tariffs to finance a "tax cut of up to 5 trillion dollars." This would put more money in the pockets of Americans, which could generate inflationary pressures and lead to increases in interest rates.
Funcas mentions that the European Commission has promised a firm response, although it has not yet detailed its steps. It points out that one option on the table is the use of the Anti-Coercion Instrument, which would allow for a response to U.S. tariffs with its own measures, if approved by a qualified majority of member states.
Trump's new measures open a period of great uncertainty for global trade. Although the immediate damage to Spain seems contained, the medium-term effects could be much deeper if the protectionist escalation continues. As the Funcas report concludes, "it would be desirable to deepen European integration and the prevalence of the rule of law" to face with strength a new trade order that is already taking shape.