How Trump’s Tariffs Will Affect Portugal

Written By Becky Gillespie

President Trump’s new tariff policy triggered a tsunami across global markets with Portugal now bracing for significant economic impact. The sweeping measures include a baseline 10% tariff on all imports to the United States. The European Union products now face a steeper 20% tax.

For Portugal, this represents a serious challenge. The U.S. is the country’s primary non-EU trading partner, with exports to America accounting for 2% of Portugal’s GDP in 2023. The Bank of Portugal (BdP) has already begun calculating the potential damage to the nation’s economy. Trump positioned these tariffs as a negotiating tool to force other countries to remove trade barriers to American products. For the EU specifically, the 20% tariff rate sits between China’s 34% and Japan’s 24%.

The implementation timeline is aggressive. The baseline 10% reciprocal tariffs took effect on April 5th, and the remaining higher tariffs follow on April 9th. The EU response to steel and aluminum tariffs is expected by April 13th, which may create a rapid escalation in trade tensions.

Industries at Risk

Several key industries are particularly vulnerable. Non-metallic mineral products (including glass and ceramics), textiles, beverages, and electronics sectors show the highest exposure to the American market. Between 8% and 12% of companies in these sectors have significant ties to U.S. customers.

While approximately 70% of Portugal’s exports to the U.S. currently face minimal tariffs between 0% and 2%, about 6% of export value will be hit with tariffs of 10% or higher. The actual impact will depend on the specific goods affected and their importance to Portugal’s export strategy.

Manufacturing sectors may face especially difficult decisions. Companies could absorb costs by reducing profit margins, pass costs to consumers at risk of decreased demand, or consider relocating production facilities to avoid tariffs entirely.

Wine Industry Concerns

The timing couldn’t be worse for the Portuguese wine industry. The North American market ranks in the top five export destinations for wines from this region. In 2024, Portugal exported approximately 36 million euros of Port wine to the U.S., which represents a 6.5% increase from the previous year. Douro DOC wines generated about 5.6 million euros from American consumers, which was already experiencing sales challenges before these new tariffs were announced. The European Committee of Wine Companies has predicted postponed investments and potential job losses across the sector.

Economic Projections

The Bank of Portugal predicts multiple economic reactions to the tariffs. American consumers will see higher prices for Portuguese goods, which will likely reduce demand. Portuguese exporters may try to absorb some costs by lowering their prices and accepting smaller profit margins.

Some multinational companies might consider relocating production to the U.S., though this option brings complications related to advantages and cost structures. Companies may also be indirectly affected by changes from competitors and supply chain disruptions.

In a scenario where 25% tariffs are imposed with equal retaliatory measures from affected countries, Portugal could see a GDP reduction of approximately 0.7% over three years. However, when factoring in broader uncertainty and decreased investor confidence, the cumulative GDP reduction could reach about 1.1%.

The effects would be front-loaded, with the most significant impact occurring in the first year as markets adjust to the new trade reality. Reduced investment and private consumption could follow as uncertainty persists about future trade policies.

Potential Tourism Impact

While not directly addressed in the source materials, tourism represents another potential area of concern for Portugal-U.S. relations. Portugal has enjoyed a surge in American tourism in recent years. Visitors have flocked to destinations like Lisbon, Porto, and the Algarve.

While tariffs themselves don’t directly affect tourism, they could create indirect effects. If overall economic tensions between the U.S. and EU escalate, American consumer sentiment toward European travel could cool. Currency fluctuations resulting from trade disputes might also impact travel decisions.

If the cost of living escalates in the U.S. due to the global tariffs and the U.S. dollar weakens against the euro, Portugal may see a significant drop in tourism from the U.S. Conversely, if Portuguese residents and citizens decide to boycott the U.S. and protest its policies, they may decide to stay in Portugal for vacation rather than visit the U.S. In other words, Portugal may make up for a drop in tourism from the U.S. by appealing to vacationers from other destinations.

Finding Opportunity in Crisis

Despite these challenges, some see opportunity amid the disruption. Wine producers in the Douro region could explore new markets in Eastern Europe, Asia, and Latin America.

The Bank of Portugal notes that adaptation will be required from both companies and policymakers. This may accelerate diversification strategies that were already underway but now take on new urgency in the face of American trade barriers.

European Commission President Ursula von der Leyen has described Trump’s tariffs as a “severe blow” to the global economy. This shared concern across the EU may lead to coordinated responses and support mechanisms for affected member states like Portugal.

Looking Ahead

Looking ahead, Portugal faces a delicate balancing act. The country must strengthen economic resilience while exploring alternative markets. If tariffs persist or escalate into broader trade wars, Portugal may accelerate diversification efforts toward emerging economies with growing middle classes.

Tourism promotion to American travelers could become even more strategic. By highlighting unique experiences and lower costs compared to other parts of Europe, Portugal might maintain or even grow this sector despite broader economic tensions. Special tourism packages or incentives could help counterbalance export challenges.

Wine producers might explore direct-to-consumer models that leverage e-commerce and specialty importers who can better absorb or distribute tariff costs. This could transform distribution channels in ways that will ultimately prove beneficial even if tariffs are eventually reduced.

In the longer term, these trade pressures could accelerate Portugal’s economic modernization. Greater emphasis on digital services, intellectual property, and high-value products less vulnerable to tariffs might reshape the country’s economic strategy for decades to come.

While short-term pain seems inevitable, Portugal’s adaptability, quality exports, and attractiveness as a destination position it to eventually navigate these turbulent economic waters. The resilience shown by regions like Douro through previous challenges suggests that Portugal will find creative paths forward despite these new trade barriers.

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