10-04-2025
The Economic Observatory at Francisco de Vitoria University (UFV) presents an analysis of the implications of the trade war, examining the potential economic effects these measures could have on the international economic order established over the past eighty years.
The Economic Observatory at Francisco de Vitoria University (UFV) has conducted a detailed analysis of the consequences of the trade war.
The report notes that the resurgence of protectionism in the current international context could have significant effects on the global economy and employment. The UFV study highlights that the economic development of modern societies, both nationally and internationally, has historically been linked to free trade and the reduction of trade barriers.
Historical data show that the first half of the 19th century, the second half of the 20th century, and the 21st century so far have been periods of greater economic expansion and international stability, coinciding with phases of trade liberalization.
According to the analysis, free trade offers several benefits for economic progress:
On the contrary, the report warns that trade restrictions can have negative effects:
All of this depends on the intensity of the response and the escalation of the trade war, with the resulting job losses, particularly against the backdrop of an economic slowdown in the EU and perhaps in the United States—despite the strength its economy has shown so far—as stock markets are already reflecting, leading many economic actors to assign a higher probability to a recessionary scenario. These calculations are based on these initial consequences. If volatility continues to grip the markets and uncertainty continues to plague the economy as a whole, then the impact could be much greater—with consequences that are currently difficult to quantify.
Source: Compiled by the author based on available data regarding the trade war and the economic structure of the affected regions.
The response to protectionism should not be more protectionism, but rather liberalization. The most effective economic response by the European Union and other affected countries should not focus on tariff measures, but rather on moving toward greater openness, undertaking structural reforms, and reviewing any barriers that may be limiting the competitiveness of citizens and businesses, particularly within Europe.
If the EU chooses this reformist path, it can take the lead in the global economy in the face of the United States’ stance. If, on the other hand, it responds with tariffs, it will impoverish its citizens just as the United States will impoverish Americans with its own tariffs.
In addition, Spain and the other EU member states should help reduce costs for businesses not through subsidies, but by lowering taxes, social security contributions, and regulatory barriers to economic activity, which represent a significant obstacle to the creation of wealth and jobs.
Therefore, from an economic rationality perspective, the response could focus on greater trade liberalization and a reformist drive that strengthens the European Union’s global competitiveness. In a scenario where the United States adopts a more protectionist stance, this approach would allow the EU to position itself as a leader in the global economy. Furthermore, such a strategy could encourage the United States to reconsider its position.
If the European Union were to respond with protectionist measures, it would be unlikely to reverse the impact of U.S. tariffs on its exports; moreover, such measures could have a negative effect on the purchasing power of its citizens by making imported goods more expensive in response to the United States. In this context, a strategy focused on greater openness and economic freedom could yield better results in the medium and long term than an escalation of trade restrictions.
In March 2023, the Francisco de Vitoria University Economic Observatory was established, comprising a team of Spanish economists including Pedro Schwartz, Francisco Cabrillo, Jaime García-Legaz, Gregorio Izquierdo, Fernando Merry del Val, Pedro Cortiñas, and Javier Fernández-Lasquetty, led by José María Rotellar. The observatory meets every three months to analyze economic trends and may issue recommendations on the measures needed to ensure the economy’s smooth functioning. In the days following each quarterly meeting, a brief report is published containing the analysis and recommendations discussed at the observatory meeting, and it conducts analyses of specific measures whenever relevant.
