Bank of Spain lowers 2025 growth forecast amid US tariff uncertainty

Thursday 12 June 2025 - 14:45

Spain’s central bank has revised its 2025 economic growth forecast downward, citing the impact of US tariffs and the risk of a global economic slowdown. The Bank of Spain now predicts the country’s GDP will grow by 2.4% this year, a reduction from its earlier estimate of 2.7%.

The decision comes amid heightened trade tensions following US President Donald Trump’s recent imposition of 50% tariffs on steel imports, alongside 25% tariffs on vehicles and 10% reciprocal tariffs on various other goods. These measures have raised concerns about further economic disruptions as a 90-day suspension of EU-US tariffs is set to expire on July 14. Negotiations to avert additional tariffs remain ongoing but have yet to yield a resolution.

In a statement, the Bank of Spain highlighted a "small slowdown in the pace of GDP growth" expected in the second half of 2025. It also slightly reduced its 2026 projection from 1.9% to 1.8%, attributing the adjustments to "heightened uncertainty" surrounding global trade and economic conditions.

The central bank warned that markets remain "very vulnerable to possible negative disruptions," with declining consumer confidence likely to dampen spending. While the bank expressed cautious optimism about ongoing US negotiations with major trading partners, it also acknowledged the possibility of an intensified trade conflict.

The European Commission, in estimates made before Trump took office, had forecast Spain’s 2025 growth at 2.6%. The new forecast reflects the mounting challenges faced by Spain, the eurozone’s fourth-largest economy, in navigating the fallout from protectionist trade policies.

Spain’s Economy Minister Carlos Cuerpo weighed in on the situation, stating that the European Union remains committed to deepening economic ties with the US. “From the EU side, we are constructive but we are not naive,” Cuerpo said in an interview on Tuesday, adding that the bloc is prepared to explore "other routes protecting our firms and industries" if a deal cannot be reached.