Economic sanctions imposed by Trump driving markets to a crisis not seen since the end of World War II.
The United States has announced new trade tariffs, set to be imposed on August 7, which are expected to have a modest but negative impact on the global economy, including Spain and the broader European Union (EU).
The temporary agreement regarding trade tariffs between China and the US offers a brief respite, but the looming tariffs are predicted to reduce global GDP by around 0.7% to 1%, depending on their severity and retaliatory measures. For the EU, the long-run effects appear relatively mild in terms of aggregate GDP, with a very slight growth increase of about 0.1%. Spain, as an EU member, may face costs related to disrupted supply chains and market uncertainty, although no specific impact estimate for Spain alone was provided.
The US economy is projected to suffer more significantly, with real GDP growth reduced by roughly 0.5 percentage points over 2025 and 2026. This would result in a long-run economy approximately 0.4% smaller than it otherwise would be. The tariffs could potentially lead to a contraction in sectors such as construction, agriculture, and mining, while manufacturing output might grow modestly due to protectionist effects. However, this growth is offset by the contraction in other sectors, and the tariffs dampen business sentiment, which weighs directly and indirectly on spending and hiring, potentially pushing the economy toward recession conditions.
The trade tariffs could also have far-reaching effects, causing international markets to tremble and leading to a shift towards economic and political isolationism. This shift could weaken the US's traditional role as a guarantor of international order, potentially echoing effects seen since World War II.
Moreover, the tariffs are predicted to drive up inflation, especially in the US, and increase the probability of a rapid expansion cycle followed by a contraction. This scenario, according to Wellington Management, would reinforce an already structurally higher inflation and increase the probability of a recession.
The differential of growth in earnings between the group of "Seven Magnificent" of technology actions and the rest of the US stock market is likely to decrease, driving a period of less concentrated markets and a more diverse market leadership. The US economy is anticipated to limit its growth to 1.5% in 2025, which would be its lowest pace since 2011, excluding the impact of the 2020 COVID pandemic.
From Singular Bank, it's highlighted that tariff policy could provoke inflationary pressures that could drive up the budget deficit to 9% of GDP by 2035. The implementation of Trump's nationalist agenda under the slogan "Make America Great Again" could further exacerbate these pressures and weaken the US's traditional role as a guarantor of international order.
Sources:
- J.P. Morgan Global Research, July 30, 2025
- Yale Budget Lab, July–August 2025 reports
- The trade tariffs, despite offering a temporary respite to China, are predicted to negatively impact average economic growth, potentially reducing global GDP and causing inflation, especially in the United States.
- The increased budget deficit, driven by inflationary pressures from the tariffs, could reach up to 9% of GDP by 2035, adversely affecting both the domestic and international economy.
- The broad impact of the tariffs on business, politics, and general news outlets highlights the potential for a shift towards economic and political isolationism, which could weaken the US's traditional role in global finance, particularly in areas such as investing and business deals.
