US Tariffs and Mallorca Property: What Will It Mean for Prices?

Since returning to office in January, Donald Trump has taken a radically aggressive stance on global trade. He named 2 April “Liberation Day” and announced sweeping reciprocal and protective tariffs targeting every major trading partner.

Although tariffs had long been discussed as a cornerstone of the US administration’s policy, few analysts expected the enacted measures to be so severe. As a result, markets were caught off guard, with little of the impact priced in.

While some analysts expected bold rhetoric, few anticipated such severe execution. The baseline US import tariff was set at 10% (effective 5 April), but for what the administration deemed the “worst offenders”, 57 countries, the penalties were far higher:

• 20% for the European Union
• Up to 49% for Cambodia
• And for China, an extraordinary 104% import levy went into effect on 9 April

Framed by the Trump administration as a justified response to counteract the US trade deficit, the tariffs have instead triggered widespread retaliation and global financial instability.

China responded with a 50% counter-tariff, raising its effective levy on US goods to 84%. As of late April, Chinese exports to the US face tariffs as high as 245%, while Beijing has retaliated with a 125% charge on American imports.

Markets reacted swiftly. On 4 April, the US stock market lost over $2.5 trillion in value. Global markets followed, wiping out an estimated $10 trillion – a sum equivalent to more than half of the GDP of the European Union.

Perhaps more than the equity market losses, it was the sharp sell-off in US Treasuries that ultimately forced the administration to respond. Demand for government bonds collapsed, and the traditionally safe Treasury market came under pressure, signalling a broader, more alarming loss of confidence in the US economy. Key analysts, bankers and institutional investors were raising the alarm, warning that the US was on the brink of triggering a recession if immediate action wasn’t taken. By 9 April, the pressure had reached a point where the administration was forced to act – it announced a 90-day suspension of tariffs for all countries except China. US markets briefly rebounded, but the bounce was short-lived.

Today, volatility persists. The tariffs have added fuel to the fire of already unstable global markets, driven by geopolitical tensions, climate instability, inflationary pressures and broader systemic risk.

In this article, we assess how these US tariffs may impact real estate markets in resort-driven destinations shaped by international demand. We are not going to spend too much time analysing the effects of these tariffs on broader economic dynamics, as they follow well-established macroeconomic principles that have already been widely discussed. Instead, after a brief look to set the stage, we will shift our focus to the more specific implications for overseas resort property markets, with Mallorca as our central case study.

Acknowledging Broader Economic Forces and Complexities of Market Dynamics

While this article focuses on projecting property prices based on GDP levels, it’s worth briefly acknowledging the broader economic forces at play. Tariffs typically increase input costs across the construction sector, putting upward pressure on build prices and potentially on new home prices. At the same time, inflationary effects may well be offset by declining economic activity and a slowdown in demand, which tends to have a cooling effect on pricing. Other market dynamics include interest rate movements, currency shifts, and bond market volatility but the way these forces play out varies widely across countries, and their effect on property markets is virtually impossible to model with precision.

The divergence in central bank responses makes this even clearer. Following the US tariffs, the Bank of England is expected to accelerate rate cuts (source: Reuters), while the same policy shock has complicated the European Central Bank’s roadmap to lower interest rates (source: Euronews), a reminder of just how fragmented and unpredictable these dynamics can be.

Given the huge complexity involved in modelling these macroeconomic effects across multiple destinations, we have instead focused on the clearer signal provided by the metric of real GDP. For both historical and forecasted GDP levels, we have drawn from the IMF’s World Economic Outlook Report – widely cited for its credibility and the sophistication of its modelling.

International Resort Markets vs. Domestic Markets

International resort property markets, such as Mallorca, Phuket, and the Algarve, tend to attract wealthier, internationally mobile buyers. Many purchases are for second homes, lifestyle assets, or long-term investments, rather than primary residences. As a result, overall transactions in these markets exhibit a substantially lower ratio of leverage to cash. Because demand is often driven by lifestyle appeal, capital diversification, and discretionary wealth, they are less exposed to domestic economic cycles or credit conditions. These characteristics generally allow them to weather global downturns with greater resilience, unless distorted by overbuilding or speculative excess, as seen in past cycles in markets like Dubai.

How to Model the Impact on the Mallorca Property Market

Because there are so many overlapping dynamics in real-world economic modelling – from interest rates and inflation to currency shifts, fiscal policy, and consumer sentiment – all of which would need to be applied across the full set of countries that make up Mallorca’s international buyer base, any attempt to build a precise forecast for the island’s property market is ultimately futile.

Instead, the most sensible approach is to focus on the most important macroeconomic indicator, GDP, and use credible forecasts from a globally recognised body – we have used the IMF – to estimate the likely contraction (or growth) in the economies of Mallorca’s primary buyer countries.

By comparing these GDP projections to the actual contractions recorded during the Global Financial Crisis – the most appropriate historical analogue – and assessing how Mallorca performed during that period, we can arrive at a grounded, proportional sense of how the island’s property market is likely to be affected.

Though our core model focuses on GDP as a clear and consistent proxy for macroeconomic pressure, it is hugely important to note one key difference between the current environment and the post-GFC period: there is no evidence of a systemic credit squeeze. We return to this point later in the article, as it has important implications for how demand may translate into transactional activity.

Our Methodology

To assess the likely impact of global tariffs on the Mallorca property market, we’ve used a straightforward, comparative approach:

1. Identify the main international buyer countries for Mallorca, based on official transaction data.
2. Source GDP forecasts for 2025 from a single, reputable forecasting body to ensure consistency – in our case, the IMF.
3. Apply each country’s market share (as a percentage of foreign transactions in Mallorca) to calculate a weighted average GDP projection for the overall buyer pool.
4. Identify the GDP contraction experienced by Mallorca’s primary buyer countries during the Global Financial Crisis, and calculate a weighted average based on their share of property transactions.
5. Compare the weighted average GDP contraction during the GFC to the current GDP forecast, to estimate the relative level of economic pressure and its likely impact on property prices in Mallorca.

Foreign Buyer Distribution for Mallorca

According to the Majorca Daily Bulletin (April 2025), foreign buyers accounted for 32.6% of property purchases in the Balearics. A separate report from the same publication (October 2023) provides a breakdown by nationality with Germans representing 38% of foreign buyers, Britons 25%, and Americans 13%.

Share of Total Transactions by Buyer Nationality

• Germany: 12.39%
• United Kingdom: 8.15%
• United States: 4.24%
• Other countries (Eurozone): 7.86%
• Spain (domestic): 67.4%

Note: The remaining 24% of foreign buyers were not broken down by nationality in the source data. For modelling purposes, we have allocated this share to other Eurozone countries.

Modelling the Pressure on Buyer Economies

To quantify the level of economic pressure likely to affect property demand in Mallorca, we constructed a weighted average GDP forecast using the IMF projections for 2025, see table below, and our breakdown of buyer nationalities as given above. Each country’s GDP forecast was weighted according to its share of total property purchases.

This approach provides a proportional view of how strongly macroeconomic conditions are likely to influence overall demand. The result is a weighted average GDP forecast of +2.02% (see appendix for calculation).

This figure reflects the mix of strong domestic growth – Spain (2.5%) – and weaker forecasts from key international markets such as Germany (0.9%), the United Kingdom (1.1%), the United States (1.8%), and other Eurozone countries (0.8%). It provides a clear, proportional estimate of the economic climate facing Mallorca’s property sector in 2025, based on GDP projections published by the International Monetary Fund (IMF), April 2025 World Economic Outlook, see below:

IMF GDP Projections for 2025

Note: data is based on statistical information available through April 14, 2025.

Even under JP Morgan’s downside scenario (their prediction is based on a 10% universal tariff and a 110% tariff on China) – where tariffs reduce global GDP by as much as 1% – the outlook for Mallorca remains comparatively strong. The IMF’s baseline projection for 2025 is +2.8%, and our weighted GDP growth forecast for Mallorca’s primary buyer economies stands at +2.02%. That’s not just positive – it’s historically resilient when compared to the contraction experienced during the GFC, which we will explore later.

US Performance Figures for Quarter One 2025

The U.S. economy contracted by 0.3% in the first quarter of 2025 (Wall Street Journal, April 2025), largely driven by front-loaded import activity and broader uncertainty surrounding the Trump administration’s tariff policies. Whether or not a second quarter of contraction will follow – which would meet the standard definition of a technical recession – remains to be seen. For now, the IMF’s full-year projection still expects the U.S. to grow by 1.8% in 2025, reflecting a possible rebound in the second half of the year.

Contractions: GFC vs. Projections for 2025

To understand how serious the current global pressures might be for Mallorca’s property market, we look back at the Global Financial Crisis – the last sustained period of global economic contraction.

In 2009, our key Mallorca buying countries experienced sharp and synchronised economic contractions.

Based on the IMF data above, we calculated a weighted average GDP contraction of –3.91% (see appendix for calculation) across Mallorca’s primary buyer base that year.

By contrast, for 2025, the weighted average GDP forecast for those same countries for 2025 is +2.02%. This marks a swing of nearly six percentage points – a significant improvement in the macroeconomic backdrop compared to the post-GFC environment.

The Resilience of Mallorca’s Property Market

Mallorca’s ability to weather shocks is rooted in deeper structural features that have remained consistent across decades of global downturn and crisis. These characteristics help explain why the island’s property market has historically shown greater stability than other regions, and why it recovered more quickly after the Global Financial Crisis.

The Mallorca and Spanish Property Markets: Performance During and After the GFC

Unlike many domestic markets that suffered sharp corrections during the GFC, Mallorca’s downturn was modest. Prices did decline in 2007 and 2008, but by 2009, Idealista data shows that a recovery was already underway – driven largely by sustained international demand and a strong tourism base. The graph below illustrates how prices in the Balearic Islands rebounded more quickly than the national average.

Appendix: Weighted Average GDP Calculation (2025)

Data Sources:

• GDP forecasts: IMF World Economic Outlook, April 2025
• Buyer share data: Majorca Daily Bulletin, April & October 2023–2025

Total Weighted Contribution:
168.5 + 11.151 + 8.965 + 7.632 + 6.288 = 202.536

Divide by total buyer share (100%):
202.536 / 100 = ~2.02%

Appendix: Weighted Average GDP Contraction (2009 – GFC)

Data Sources:

• GDP data: IMF World Economic Outlook, October 2010
• Buyer share data: Majorca Daily Bulletin, April & October 2023–2025

Total Weighted Contribution:
-249.38 + -58.233 + -39.935 + -11.024 + -32.226 = -390.798

Divide by total buyer share (100%):
-390.798 / 100 = ~–3.91%