Portuguese finance minister warns of volatility as Trump threatens new EU tariffs
The United States has warned it could apply "very heavy tariffs" on the European Union or even restrict trade altogether, if Brussels proceeds with plans to bring Canada closer to the bloc. President Donald Trump described the proposal as "ridiculous" and suggested it could be considered a hostile act. Portugal's Finance Minister Joaquim Miranda Sarmento, speaking to journalists in Dublin, said the threats represent another factor of volatility and uncertainty for international commerce.
"Tariffs harm economies, they harm consumers, especially those on lower incomes," Miranda Sarmento stated, according to comments reported by the Lusa news agency. He welcomed the prospect of deeper trade ties between Brussels and Ottawa, adding that fair and balanced international trade generates gains for all.
What the EU-Canada proposal involves
European Commission President Ursula von der Leyen proposed that Canada become the first "associated member" of the European Union. The arrangement would deepen cooperation on technology, defence and energy. Canada has been seeking to diversify its trading relationships beyond the United States amid an ongoing trade war with Washington. Trump responded by threatening to apply steep tariffs or limit trade with Europe if the EU-Canada plan moves forward.
Why this matters for Portugal
Portugal's direct exposure to US tariffs is considered limited but real. Analysis suggests 2.1% of domestic production depends on exports of goods to the United States, representing about 1.3% of GDP and 1.3% of employment. The textile sector and industrial value chains are regarded as the most vulnerable. Business representatives warn of significant indirect impacts for Portuguese companies due to their integration within European supply chains.
Economic simulations suggest persistent protectionist measures could reduce Portugal's GDP by up to 0.5%. The Finance Minister noted that Portugal's geographic position could eventually offer an advantage as countries seek to prioritise trade with geopolitically closer partners.
European business sentiment shows resilience
The developments come as a joint study by the European Investment Bank and the European Commission finds that geopolitical risk has become the primary cause of supply chain disruption for EU companies. The report, titled "Restructuring supply chains: EU companies in an era of geopolitical risk," reveals that tariffs and regulatory compliance costs have overtaken logistical disruptions as the main obstacle to international trade.
Despite the challenges, nearly two-thirds of EU companies, 64%, say they are prepared to manage geopolitical risks. Almost 90% expect their export performance to remain stable or improve. However, 56% of firms expect elevated tariffs to persist long-term, and about half anticipate continued difficulties accessing production inputs.
Ongoing trade tensions with China
Separate negotiations between Brussels and Beijing have intensified. The Financial Times reported that the EU asked China to voluntarily limit hybrid vehicle exports to approximately 15% of the European market. Imports of Chinese-made hybrids surged from roughly 3,800 units in October 2024 to about 50,000 in July 2025, while facing only a standard 10% tariff. Fully electric Chinese vehicles have been subject to additional anti-subsidy duties of up to 35.3% since 2024.
Beijing rejected the proposal, stating that voluntary export restrictions violate World Trade Organization rules. European Trade Commissioner Maroš Šefčovič is expected to travel to Beijing in October for further talks.
Banking competitiveness and AI on the agenda
EU finance ministers met in Dublin to discuss banking sector competitiveness. The European Commission plans to present legislation in the first quarter of 2027 to strengthen bank competitiveness and deepen market integration. Miranda Sarmento advocated for progress on the Banking Union, including a European deposit guarantee system. He also highlighted how artificial intelligence is already part of Portugal's public sector reforms, improving speed and productivity, while stressing the need for safeguards against risks.
