While it is still too early to fully measure the impact of the tariffs, PORTUGAL DECODED shared that the Bank of Portugal (BdP) has already issued a warning. In its latest economic bulletin, BdP projected that if trade barriers escalate between the U.S. and the European Union, Portugal’s GDP growth could shrink by 1.1% over the next three years.

The immediate effect could be a 0.7% decline in GDP, primarily within the first year. A drop in investment and weaker private consumption could further slow economic growth, with a 0.9% contraction in year one and a 0.4% contraction in year two.

Beyond these direct economic consequences, rising trade tensions are creating uncertainty among businesses and consumers alike, further dampening confidence in Portugal’s financial outlook.

According to EY Tax News, on 2 April 2025, President Trump announced a broad 10% tariff on most imported goods, with EU imports, including those from Portugal, facing a 20% tariff. These measures are part of the administration’s “reciprocal tariffs” policy, aimed at reducing trade imbalances between the U.S. and its partners.

Which Portuguese industries are at risk?

Wine Industry: Luís Machado, president of the Douro Intermunicipal Community (CIM), warned that tariffs will have an immediate effect on the wine industry, which has spent years establishing itself in the U.S. market. However, he also highlighted that this could be an opportunity to diversify exports into new regions.

Energy Sector: Portugal’s oil and gas industry is also in the spotlight. Galp Energia, one of the country’s leading energy firms, has stated that it has the flexibility to redirect gasoline exports to other markets if tariffs disrupt trade with the U.S.

Textile, Electronics & Leather Goods: According to BdP’s March economic bulletin, textiles, electronics, optics, leather goods, and ceramics are among the most export-dependent industries. Around 12% of Portuguese businesses exporting to the U.S. rely on that market for 5-10% of their total sales, with 4% of firms relying on the U.S. for over 40% of their revenue.

Author: PORTUGAL DECODED ;

Government response

In response to growing concerns, Portugal’s Minister of Economy, Pedro Reis, has announced a set of measures to support affected industries. With regards to key government actions, the creation of a tariff monitoring group will track economic impacts and trade developments.

Businesses will have access to EU structural funds for research, technological innovation, and international expansion. Minister Reis will also be meeting with 16 major business associations, including representatives of the automotive, electronics, fuel, textiles, and footwear industries, to assess risks and develop strategic responses.

While Portugal’s response will be coordinated at the EU level, Minister Reis has warned that excessive EU retaliatory tariffs could raise costs for intermediate goods, which could negatively affect domestic manufacturers. He stressed the importance of a strategic European response to mitigate economic risks while safeguarding Portugal’s business interests.

What is next for Portugal’s economy?

As trade tensions escalate, Portuguese businesses are bracing for potential disruptions. While some industries, such as wine and textiles, will need to explore alternative markets, others, like energy, may have the flexibility to pivot to new buyers. However, the broader economic outlook remains uncertain, with consumer confidence and investment potentially declining in the coming months.

As negotiations between the U.S. and EU continue, Portuguese policymakers and business leaders are seeking strategies to minimise the damage while adapting to an increasingly volatile global market.

Author

Following undertaking her university degree in English with American Literature in the UK, Cristina da Costa Brookes moved back to Portugal to pursue a career in Journalism, where she has worked at The Portugal News for 3 years. Cristina’s passion lies with Arts & Culture as well as sharing all important community-related news.

Cristina da Costa Brookes