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The existence of a link between exports and domestic demand challenges the standard theoretical assumption in international trade models and carries out important policy implications. Being a small open economy and one of the hardest hit economies during the latest economic and financial crisis, Portugal is a natural case study for assessing the role of this channel, in particular given the large export market share gains that mitigated the negative effects on economic activity. A key difference of our empirical approach vis-`a-vis previous literature is that the estimated relationship between exports and domestic sales results directly from a monopolistic model of a firm selling to both domestic and external markets. Drawing on an appropriate estimation strategy, it is found a noteworthy negative relationship between domestic demand and firms’ exports covering the manufacturing sector over the period 2009–2016. This result holds for almost all industries although with a heterogeneous magnitude. Aditionally, there is also evidence that this effect is stronger for larger firms., COMPETE, QREN, FEDER, PORTUGAL 2020, Fundação para a Ciência e Tecnologia (FCT)