Economy. First projections already show a slowdown in GDP. The impact will depend on the evolution of the trade war. Deficit may return With Donald Trump's advances and retreats, economists risk their projections being out of date the very next day. The new tariffs came into force on Wednesday, only to be partially suspended hours later. The European Union (EU), which that day approved retaliation to the first American measures, also left them on stand-by to negotiate. Making predictions in this context is a risky exercise, but there are those who do. The most recent forecasts for the national economy point to a slowdown in GDP in the first quarter and for the 12 months of the year as a whole. Some do not yet take into account the tariffs that Trump intends to apply. For the first three months of 2025, which coincide with the start of Donald Trump's new term, there are already downward revisions. Católica is more pessimistic, pointing to an advance of just 0.2% between January and March, with tariffs limiting the positive effect that came from the last quarter of last year, when GDP soared by 1.5%. The CIP/ISEG Barometer estimates 0.1% until March, still without taking into account the tariffs announced on April 2. Even with a lower exposure to the US compared to other EU countries, Portugal will not escape the brake on the European economy if the tariffs go ahead after the 90-day suspension. Last year, Portugal exported €5.3 billion in goods to the US, a market that has grown in importance and is now Portugal's fourth largest trading partner. Mainly chemical products (here the pharmaceutical industry stands out), minerals and machinery/appliances, which together account for 55.3% of exports of goods to the world's largest economy. More inflation? Economists interviewed by Expresso, following Trump's announcement that he would apply his curious formula of customs duties to practically every country in the world, believe that no, these new costs will not result in more inflation. They could, however, lead to sudden brakes in global economies that will limit consumption. In other words, a short leash on prices thanks to the crisis. Miguel Faria e Castro, an economist at the St. Louis Federal Reserve, believes that if the tariffs are indeed implemented after the 90-day moratorium, the recessionary effects of this disruption to international trade could mean a "brake" on rising prices. While in the US the effect of the tariffs will be to increase costs more quickly and therefore prices, in the Old Continent the effect could be the opposite: to slow down inflation. "On the one hand, goods imported from the US could rise in price due to retaliation by the European Union (EU). Goods whose supply chains pass through the US will become more expensive. But on the other hand, these tariffs constitute a major negative shock to demand for exports to the EU. This could lead to a decline in aggregate demand and a traditional recession, with a slowdown in growth and lower inflation," the economist told Expresso. "In addition, there is the question of China, whose economy was extremely oriented towards the export of low-cost consumer and industrial goods to the US. With the US market effectively closed, China may turn to Europe as a destination for exports, which could lead to price reductions." Portuguese exports to the US Values in millions of euros The impact of these tariffs on Portugal, "a small open economy" on the western edge of Europe, will be felt not only in terms of trade in goods between Portugal and the US, but also indirectly. The country, he says, will suffer the negative effects that a possible recession could have on visitor numbers. "I think the main vulnerability comes from the fact that the Portuguese economy is very dependent on the export of services such as tourism, which is an activity that is very sensitive to global economic conditions. If the global economy goes into recession, which is now more likely in the US and China, there will be less demand for these types of services," says Miguel Faria e Castro. In 2024, Portugal exported EUR 5.3 billion to Washington, which is now its fourth largest trading partner Gonçalo Pina, professor of international economics at ESCP Business School, says that the "worst thing of all" is "the fall in stock markets, the rise in interest rates everywhere, the fall in the price of oil, along with various other indicators that point to a global recession that will have the effect of lowering demand and prices". And he corroborates the idea that a new outbreak of inflation is not on the horizon: "The final effect could even be less inflation in Europe." "Portugal is exposed to some agricultural, textile, footwear and manufacturing products. But overall, it will be less exposed than other EU countries because it exports more services, particularly tourism. A global recession will affect all demand, so it will always be a negative shock for Portugal," stresses the economist. Economy slows down in 2025 The figures released by the Bank of Portugal and the Portuguese Public Finance Council (CFP), based on data from March and early April, differ. With slight revisions - both upwards and downwards - to growth rates, they maintain the view that GDP will grow faster this year, above 2%. And they believe that inflation will continue to approach 2%. GDP growth forecasts In percentages However, in the Bank of Portugal's Economic Bulletin of March of this year, it was already predicted what the impact of customs tariffs could be. Still based on the threat of 25%, the central bank predicted a cumulative penalty of 1.1% on Portugal's GDP after three years, and more concentrated in the first year. In other words, Mário Centeno's optimism could come up against Trump's protectionism. External demand will once again make a negative contribution to GDP in 2025 and 2026, leaving the economy mainly dependent on household consumption. However, in the current context of uncertainty, with a rollercoaster ride in the financial markets and uncertainty over the actions of the central banks, it is expected that families will choose to increase their savings (at historic highs at the moment) rather than increase consumption. Deficits only in 2026, says CFP Economy Minister Pedro Reis guaranteed yesterday that Portugal will not return to deficits this year. And the CFP confirms it: in its projections, released yesterday, it revised downwards the budget target (which was a surplus) and now anticipates a neutral balance, of 0%, for 2025. Deficits will only start in 2026 if fiscal policy doesn't change: it will be 1% that year, "more than half influenced by the impact of the PRR loans (0.6% of GDP)" and "around 0.6% of GDP" until 2029. The CFP also warns that the net expenditure indicator, which is the reference in Brussels for analyzing the accounts, "will grow above the commitment made by the Portuguese state". This will put pressure on the future government. At a time when we really don't know how the trade war will end. SIX QUESTIONS TO Pedro ReisMinister of Economy After listening to 16 business associations and confederations, did you get a clear idea of their main concerns? There are sectoral specificities, but we noticed that the general will is for Europe to go down the path of negotiation. We saw a lot of pragmatism and no warmongering, not least because there is awareness that if the impact of the United States placing tariffs on our exports is negative, there will also be negative repercussions if we impose tariffs on American products that form part of our value chains. How does the Strengthening Plan respond to all this? Tariffs have two impacts, on the competitiveness of companies and on internationalization. That's what we have to mitigate and we have measures to respond to each of these points. We're talking about EUR10.085 billion... Yes. And Spain has put EUR14 billion into its program. We're talking about an economy five times bigger than ours, so the equivalent there would be something like 50 billion. If we look at Reinforcements compared to the RRP, we're talking about 60% of the Recovery and Resilience Plan. Have there been requests for lay-offs? Tax burden? The associations that have spoken about the lay-off have done so with caution, noting that it has been an important support for Covid-19. It's not on the table at the moment. And there were proposals that mentioned tax issues, but tax is not in the package either. Do you feel the government and companies are close? I felt that there is that closeness, yes. They think it's important that the response is "robust and swift" and we're still a little unclear about what's going to happen, but we've already got the package sorted out. The associations recognize that the measures are in line with what we need to shore up. Of course, this is no accident. There were clouds on the horizon and we had been working on this. If the government is the father of this package, the associations and companies are its mother. And do we need the go-ahead from Brussels or can the package go ahead now? A great deal of care has gone into engineering this program so that it can be applied immediately, so that it doesn't infringe Brussels' competition rules, so that it has measures that can be accommodated in terms of State Budget commitments. In Europe, this is a time for negotiation, not retaliation. In Portugal, what's on the table is reinforcement, not recovery. Margarida Cardoso Gonçalo Almeida Journalist Gonçalo Almeida