Tariffs Proposed by Trump Could Slash Spain's GDP by 0.74%
A new study indicates Trump's proposed tariffs could significantly affect Spain's economy.
Key Points
- • Fedea estimates a 0.74% decrease in Spain's GDP due to 10% tariffs.
- • Global and European GDP also projected to decline by 0.73% and 0.74%, respectively.
- • Countries like Canada and Mexico may face income losses between 0.5% and 0.75%.
- • Escalated tariffs could lead to a 3.38% contraction in global GDP.
A recent analysis by the Fundación de Estudios de Economía Aplicada (Fedea) reveals that proposed tariffs by U.S. President Donald Trump could have significant negative impacts on Spain's economy. Specifically, the study estimates a 0.74% reduction in Spain's GDP should a general 10% tariff on imports be implemented. This decline is mirrored by projections for the global and European economies, which are expected to experience a GDP decline of 0.73% and 0.74%, respectively.
The study highlights that while countries directly exporting to the U.S. may face immediate financial strains, the effects will ripple through international supply chains, impacting even sectors that do not trade with the U.S. For instance, businesses will likely confront increased costs that will lead to broader economic repercussions. The potential income losses for other significant trade partners, such as Canada, Mexico, and China, are estimated to range between 0.5% and 0.75%.
Moreover, in a hypothetical scenario where tariffs escalate significantly—imposing a 25% tariff by Canada and Mexico, 15% by the EU, and an astonishing 145% by China—global GDP could plunge by as much as 3.38%, with the U.S. experiencing a 3.78% contraction.
Fedea's report underscores a crucial point: the instigator of a trade war often ends up being the biggest loser, suffering from lower real wages and increased imported inflation. Although tariffs may not greatly alter global trade volumes, they effectively shift trade flows, with many U.S. goods finding new markets in neighboring countries like Mexico.