Bank of Spain Slashes Growth Forecast Amid Trump’s Tariff Shock

The Governor of the Bank of Spain, José Luis Escrivá, announced this Wednesday that the institution will revise its economic projections for the country downward due to the recent tariff policies promoted by the United States.

“We are seeing how some of the more adverse scenarios we had contemplated are taking shape”, he stated in an interview with TVE, just a month after the institution had raised its growth expectations to 2.7%, two tenths above its previous estimate.

Escrivá emphasized that any new projection will be subject to “a very high degree of uncertainty”, given that current analytical tools fail to fully capture the magnitude of these events. According to the governor, the Bank of Spain is closely monitoring this situation, which he described as “exceptionally complex from both an economic and geopolitical standpoint”.

“It is clear that what is happening could have a very negative impact on the global economy, with effects that will be distributed unevenly across countries. However, we still lack concrete data on how this will manifest or over what timeframe”, he affirmed.

Last month, the Bank of Spain had already noted that uncertainty levels were rising due to Trump’s statements on tariffs, recalling that history shows such tensions typically translate into an economic slowdown after a lag of about a year.

A “Profound Shock”

The governor described Trump’s tariff policy as a “profound shock” capable of causing “significant declines or a slowdown in economies like Spain’s, which until now had shown a solid growth pace”.

While he avoided mentioning a recession, Escrivá acknowledged that “there will be an impact on economic activity”. He also highlighted that the responses adopted to counter these measures are contributing to a rise in prices.

In its report from a month ago, the Bank of Spain had already warned of the potential repercussions of U.S. tariffs on financial markets, suggesting they could trigger “abrupt movements in assets, affecting growth and confidence”. This Wednesday, Escrivá expanded on this idea: “Beyond the immediate effects, there are less visible but equally serious aspects. This is not just about tariff increases, but a potential breakdown in global supply and value chains, which have been key to international production. This could fragment trade and generate additional disruptions”.

According to the governor, these secondary effects will be harder to assess and may become evident over time. Added to this is an impact on confidence: “When markets, consumers, and investors face a disruption of this magnitude, they tend to postpone spending decisions, which can worsen the situation with some delay. All of this greatly complicates putting exact figures on the impact, both on economic activity and inflation”, Escrivá concluded.

Trump’s Tariff War Escalates

The tariff war unleashed by Donald Trump took a drastic turn on April 2, when the U.S. president announced the imposition of a general 10% tariff on imports from around the world, accompanied by additional surcharges for countries with which the United States has a significant trade deficit, such as the European Union, which since last Wednesday has faced a 20% rate.

This trade offensive, which breaks with decades of efforts to liberalize global commerce, aims to pressure exporting nations and rebalance the U.S. trade ledger, but it has sparked a chain reaction of uncertainty and geopolitical tensions.

Financial markets have responded with volatility, while more open economies, such as Spain’s, fear a slowdown stemming from disruptions in supply chains and the rising cost of goods, in a context where retaliatory measures from other blocs could further intensify the economic conflict.