CEE Special: Will tariffs knock out the growth?
CEE Economies Special Report , 8. Apr.
President Donald Trump has announced new import tariffs on all goods entering the US on April 2, 2025. The EU will face a 20% tariff on all EU exports to the US. In addition to that, a 25% tariff on vehicles has been implemented as of April 2nd. The market reaction has been harsh, with stock exchanges plunging, long-term yields declining, and local CEE currencies depreciating visibly against the euro. Trade policy uncertainty has skyrocketed to record-high levels even before Wednesday’s announcement. Such instability in the business environment alone imposes significant economic costs by making spending, investment, hiring, and transport decisions more difficult. In response to the global tariffs, we are revising our growth forecasts for 2025 and 2026.
Our initial growth expectations for CEE were between 2% and 3.8% in 2025 and between 1.9% and 4.3% in 2026. The revision of forecasts for 2025 is rather marginal, up to 0.3 percentage points depending on the country. The negative impact in 2026 is slightly bigger. However, in 2026, the final magnitude will depend on the durability of the current tariff rate (baseline scenario of tariffs reduction to 10% in 2H25 vs. adverse scenario of a 20% rate permanently set). The hit to economic development in the region should be mitigated to some extent by the expected fiscal stimulus in Germany.