On Tuesday, the Spanish government approved a royal decree-law aimed at mitigating the negative effects of tariffs imposed by former U.S. President Donald Trump.

The plan, outlined in a draft document, includes six articles and three provisions, detailing measures to enhance investment, liquidity, and the export activities of affected companies.

Key initiatives include the provision of guarantees to facilitate access to financing and an extension of the accounting moratorium on pandemic-related losses until 2026.

In total, the government, as previously indicated by President Pedro Sánchez, is mobilizing €14.1 billion, of which €7.4 billion consists of new financing, while €6.7 billion will utilize existing instruments to implement both financial and commercial measures.

The government emphasizes that these measures are designed to assist companies in adapting to the new trade environment, safeguarding the economy, and ensuring that businesses and workers receive adequate support to minimize the impact on economic activity.

The executive sets out a dual objective: to establish an immediate protection network to cushion the tariff impact and to rejuvenate economic activity, thereby reinforcing strategic autonomy.

To achieve these goals, the government will focus on improving productive capacity and exploring alternative markets.

Recently, Economy Minister Carlos Cuerpo has urged the European Union to ratify agreements with MERCOSUR before the summer holidays, with hopes of final approval by year’s end.

Starting Tuesday, the government will launch two guarantee lines amounting to €5 billion, valid until June 30, 2026, with the possibility of extensions.

Additionally, €6 billion in intermediary financing from the Official Credit Institute (ICO) will be available to support companies in meeting their liquidity needs.

These measures target both exporting and importing companies that have a significant direct or indirect exposure to the liquidity challenges arising from declining revenues; however, specific thresholds for eligibility have yet to be clarified.

The extension of the accounting moratorium until 2026 is aimed at sectors still recovering from the effects of the COVID-19 crisis and inflation exacerbated by the war in Ukraine.

This moratorium allows affected companies to absorb pandemic-related losses without the immediate threat of dissolution due to negative net equity resulting from losses in the 2020 and 2021 fiscal years.

Furthermore, the royal decree-law stipulates that companies that have already filed annual accounts prior to the enactment of this law may reformulate them within a month, thereby excluding losses from 2020 and 2021 from dissolution considerations.

This moratorium has previously been extended to companies affected by a flood event in Valencia last October.

To support the reorientation of productive capacities, the government will also redirect €5 billion from the recovery plan to assist industries in transforming their productive capabilities toward sectors with high demand.

In parallel, €2 billion is allocated for export credit insurance and risk coverage (CESCE), including €500 million dedicated to the internationalization of small and medium enterprises (SMEs) along with a specific plan from ICEX to strengthen the position of affected sectors in the United States and access new markets.

Additionally, the decree will raise the limit on coverage provided by CESCE from €9 billion to €15 billion to bolster public support for export activities without being restricted by current limits.

The budget for the Internationalization Fund (FIE) will increase from €500 million to €700 million.

The initiative includes the Industrial Productive Investment Support Fund, endowed with €200 million to provide loans and equity participation for modernization or the establishment of new production facilities, alongside the new MOVES plan, which will allocate €400 million to stimulate the automotive sector.

In reaction to the government's actions, Juan Bravo, the deputy secretary for economy of the Popular Party (PP), discussed proposals with Minister Cuerpo to improve the government's tariff response plan.

Following this meeting, he submitted a document outlining the PP’s suggestions, which they believe could enhance the executive’s text while expressing intent to observe the government's willingness to address the situation collaboratively.

Bravo stressed the urgency for the European Union and Spain's government to formulate a coordinated and intelligent response to the imposed tariffs, combining immediate measures with medium- and long-term structural strategies aimed at enhancing competitiveness, ensuring territorial balance, and particularly protecting vulnerable sectors such as industrial and primary industries, with special attention to SMEs.

Sources from Moncloa clarified that the royal decree incorporates all measures announced by the Prime Minister.

Although discussions with the PP are progressing, the proposed changes put forth by the party have not been incorporated into the decree.

The PP's proposals include developing a coordinated action plan with regional governments for customs policies and market oversight, promoting accessibility of the MOVES incentives for electric vehicle purchasers, and ensuring Next Generation funds reach affected sectors efficiently.

Furthermore, they advocate for creating a dedicated national fund for impacted companies financed by tariffs collected in Spain and a transparent aid allocation mechanism to bolster response efforts, alongside calls for reductions in contributions and enhanced fiscal incentives for the most exposed businesses.