Edition 1493
22 September 2018
Edition: 1493

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Portugal could lose up to 2.5% of GDP' in trade war

by TPN/Lusa, in Business · 22-06-2018 10:38:00 · 0 Comments

A trade war could see Portugal lose between 0.7% and 2.5% of its gross domestic product in three years, depending on whether it is restricted to the US and its main trading partners or becomes global, the Bank of Portugal (BdP) estimated in a document released on Thursday.

Portugal could lose up to 2.5% of GDP' in trade war

 

"Since Portugal is a relatively open economy, the reduction in activity and trade at the global level has an adverse effect on the Portuguese economy," the institution warned in its latest Economic Bulletin.

 

In the bulletin, the Bank takes into account two scenarios: one with a limited trade war, in which there is an escalation of trade tensions between the US and all its trading partners, and the other a wider trade war, on a global scale, in wich all countries impose additional tariffs on others.

 

Both scenarios imply an increase in export prices of some 10%, although in the limited case they would be applied to the US and its trading partners (above all Mexico, Canada, China and the European Union) while in the global case the increase in prices would be general.

 

While the probability of a trade war is "debatable", according to the bank, it states that that of a limited one is "clearly higher" than that of a global one.

 

As for Portugal, in the limited scenario, the Bank estimates that the country would see a reduction of economic activity of 0.7% over three years, with consumer prices rising 0.4%. In the more sever case, the impact on GDP would be 2.5%, with an estimated cumulativm,e impact on prices of 1.4%.

 

The figures are being released at a time when "the risks of greater protectionism ... has been increasing, driven to a great extent by the rhetoric and recent actions of the US, as well as by the threats of retaliation by its trade partners," the Bank notes.

 

It argues that "the imposition of barriers to imports reduces the well-being of society and encourages an inefficient allocation of resources, [so] constituting an inadequate response to the challenges posed by international trade."

 

The US recently announced an increase in tariffs on imports of steel and aluminium from several major trading partners, including the EU (25% on steel and 10% on aluminium). In response, the EU is to impose a 25% rates on some products imported fomr the US from Friday.

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Edition 1493
22 September 2018
Edition: 1493

Read this week's issue online exactly as it appears in print.

Twitter

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