CEE Special Report | Trade developments in the region
CEE Economies Special Report , 30. Jan.
In response to the election of Donald Trump as the 47th US president, and with his having repeatedly commented on his plans to increase tariffs, the Trade Policy Uncertainty index has skyrocketed. Such a high level of uncertainty does not support the business environment and reduces investment and economic activity. Luckily, most of the trade activity that the region is engaged in happens within Europe. In this report, we summarize trade developments in the region. Over the last two decades, all CEE countries have become more open and increased their trade activity as a share of GDP. The general finding of the research on trade and economic activity suggests that an exogenous increase in trade has a positive, and potentially large, impact on national income.
The EU, including other CEE countries, remains a key trading partner for the region. Interestingly, trade within the region is also quite substantial. Intra-CEE trade was worth USD 237bn in 2023. Furthermore, CEE countries experienced an increase in the export of services as a share of GDP, with Croatia, Poland, and Slovenia being the most notable. Looking at the employment effect of trade in the region, extra-EU trade supports between 18% of jobs (Hungary, Romania) to as much as 30% of jobs in Croatia. As far as structure is concerned, most of the export-related jobs are in services.
The region’s direct trade exposure to the US is not too extensive. The value added of CEE countries in gross exports to the US and in US final demand differ between 9% to almost 13%. Hungary and Slovakia have the highest share of value added in gross exports to the US and in US final demand. Looking from the sector's perspective, vehicles and pharmaceutical products are most exposed to the US trade tariffs if targeted. Slovakia and Slovenia are particularly vulnerable as there is little trade diversification with the US in the case of vehicles for Slovakia and pharmaceutical products in the case of Slovenia.
The EU, including other CEE countries, remains a key trading partner for the region. Interestingly, trade within the region is also quite substantial. Intra-CEE trade was worth USD 237bn in 2023. Furthermore, CEE countries experienced an increase in the export of services as a share of GDP, with Croatia, Poland, and Slovenia being the most notable. Looking at the employment effect of trade in the region, extra-EU trade supports between 18% of jobs (Hungary, Romania) to as much as 30% of jobs in Croatia. As far as structure is concerned, most of the export-related jobs are in services.
The region’s direct trade exposure to the US is not too extensive. The value added of CEE countries in gross exports to the US and in US final demand differ between 9% to almost 13%. Hungary and Slovakia have the highest share of value added in gross exports to the US and in US final demand. Looking from the sector's perspective, vehicles and pharmaceutical products are most exposed to the US trade tariffs if targeted. Slovakia and Slovenia are particularly vulnerable as there is little trade diversification with the US in the case of vehicles for Slovakia and pharmaceutical products in the case of Slovenia.