Spanish Economy Grows 0.7% in Q2 Amid Tariff Concerns

The Spanish economy grew 0.7% in Q2, accelerating from 0.6% in Q1. The country's resilience is a sign of hope for the eurozone economy, which faces a slowdown due to higher US tariffs. Unlike Ireland, Spain's exports to the US have not driven its growth, and the impact of tariffs on the Spanish economy is expected to be minimal. The eurozone economy is expected to contract slightly in Q2, and the EU economy could face a hit of 0.5% from US tariffs on its exports.

Spain's economy sustained strong growth in the second quarter, with a 0.7% increase in GDP, according to data released on Tuesday. This acceleration follows a 0.6% growth in the first quarter, outperforming analyst expectations [1]. The resilience of Spain's consumer-led economy is notable, as it has shown resilience to the trade turmoil inflicted by Donald Trump's tariff policies.

Household consumption was a significant driver of growth, while net trade and government spending were slight drags on the economy. Spain's performance stands out among the euro area's major economies, with projections indicating a growth rate of around 2.5% for the year, more than double the pace of the eurozone's economy [1].

The eurozone as a whole is expected to face a slowdown in the second quarter, with Germany contracting and France and Italy expanding only minimally. This retrenchment is partly due to frontloading in anticipation of US tariffs. Ireland experienced a contraction in the first quarter since 2023, while early GDP indicators for Finland showed a stalled economy [1].

The recent EU-US trade deal, which includes a baseline tariff rate of 15% on EU goods imported into the US, has had mixed reactions. While the deal is seen as favoring the US, it is also expected to have a minimal impact on the Spanish economy due to its lower trade dependence compared to other eurozone countries [2]. The dollar index (DXY00) rallied sharply by +1.03% on Monday, reaching a 1-week high, as global trade tensions eased following the deal [3].

The Spanish government, led by Prime Minister Pedro Sanchez, is optimistic about the country's economic prospects. However, political challenges remain, as Sanchez does not enjoy a majority in parliament and has been unable to pass a budget for 2024 or 2025. Recent allegations of corruption within his party and government have further worsened his political position [1].

In conclusion, Spain's economic performance in the second quarter highlights its resilience amidst global trade turmoil. The country's lower trade dependence and strong services sector contribute to its robust growth. Despite political challenges, Spain's economic outlook remains favorable, with projections indicating sustained growth for the year.

References:
[1] https://www.bloomberg.com/news/articles/2025-07-29/spanish-economy-sustains-strong-growth-despite-trump-trade-flux
[2] https://finance.yahoo.com/news/live/trump-tariffs-live-updates-us-eu-deal-details-emerge-as-china-talks-begin-trump-seeks-15-20-world-tariff-200619425.html
[3] https://www.inkl.com/news/dollar-rallies-as-euro-slumps-on-the-eu-us-trade-deal