“In their current formulation and context, these measures function as taxes, acting as barriers with a clear impact on the economy. The immediate effect, like any tax, is a reduction in economic activity,” remarked Mário Centeno when asked by high school students about the impact of tariffs during the award ceremony of the Geração Eurouro Competition.
The governor noted that these tariffs are particularly harmful because “they affect all stages of production, not just final consumption,” as the international economy is integrated and “products are traded at different stages.”
“These tariffs are especially impactful on the productive fabric,” he warned, adding that “Europe and Portugal will be subject to the results of all these tariffs.” Ultimately, it will depend greatly on how each country responds, with the governor emphasizing that “Europe should react collectively to these tariffs.”
In making this decision, it is essential to consider that the “phase of retaliating will increase the economic costs of the tariffs,” he indicated, suggesting that one can expect less international trade and a redirection of commerce from some countries to others.
Therefore, the country will experience two effects: “less trade with the U.S., but possibly more trade with the rest of the world,” meaning “the volume of trade will be lower, though the price effect is more uncertain.”
Regarding the impact on inflation, “if the tariff is a tax, the price in that transaction will rise. However, since all these compensatory mechanisms and alternative trades are established, it may happen that this commerce becomes more competitive, potentially resulting in lower prices in this newly imposed trade,” assured Centeno.
Following Donald Trump’s announcement in recent months of a 25% increase in customs duties on imports of steel, aluminum, automobiles, and auto parts, the U.S. leader is expected to announce tonight (at 8:00 PM Lisbon time) new tariffs that could reach 20% on most imports, marking the so-called “Liberation Day.”
The American President aims to implement tariffs similar to those applied to U.S. products exported abroad.
The White House stated on Tuesday that the new tariffs are expected to take immediate effect.
