📩 Totalled

DEAR READER,

Big news from us! We are thrilled to share that the Talk Eastern Europe Podcast has been shortlisted for the Publisher Podcast Awards! We are running for Best Deep Dive category. We have pretty stiff competition, but we are keeping our fingers crossed. Huge thanks to everyone who tunes in and listents to us every week.

As for Brief Eastern Europe, we know that there's been a lot going on in the region lately, and we hope that we have helped you make sense of it. If you think a friend or colleague could use these insights too, make sure to forward this newsletter or send them this link to join us.

That aside, this week we are looking at how Trump's tariffs are affecting Central and Eastern Europe. We teased this topic in the last week's poll (results are below), and although the reciprocal tariffs are on pause right now, some industries are already feeling the heat.

One more thing — next Monday (April 21), we are taking a break for Easter!

Enjoy reading this week’s “brief”!

— Giorgi Beroshvili, Editor

On April 2, President Donald Trump declared what he called Liberation Day, announcing reciprocal tariffs on US trading partners. Just three days later, a sweeping 10% baseline tariff on all US imports took effect, with steeper rates for 57 countries — including a 20% tariff on most goods from the European Union. While Trump later froze these tariffs for 90 days for most nations (excluding China), there is one crucial sector — vehicles and auto parts, that remains subject to a hefty 25% levy.

So, why does this matter?

This is big for Central and Eastern Europe, where economies are heavily reliant on foreign trade. According to 2023 Eurostat data, exports make up 92% of Slovakia’s GDP and 69% of Czechia’s. And with car manufacturing being the industrial base of the region, tariffs on cars and auto parts could mean major economic fallout.

On April 3, Trump’s tariffs came into force targeting automobiles and light trucks, with comprehensive auto parts tariffs set to kick in on May 3. Even though reciprocal tariffs are currently on hold for most countries (except China), and automotive imports might eventually be exempted from the 10% baseline tariff, the financial uncertainty has already hit importers. The indirect impact on Central Europe’s economies can be felt too.

Czechia, Slovakia, Hungary and, to a lesser extent, Poland, are deeply integrated in the European, particularly German, automotive supply chain. Czechia is an interesting case. Here, the car industry employs about half a million people and plays a vital role in German production through Volkswagen-owned Škoda plants. A 2024 report by the Confederation of Danish Industry projects a 4% GDP drop for Czechia as a result of these tariffs.

Slovakia faces even steeper exposure, with vehicles and car parts making up 73% of its exports to the US. Hungary and Poland are less vulnerable, with Poland’s US trade accounting for just 5% of its total. Still, the Polish Economic Institute estimates the tariffs could shave 0.45% off the country’s GDP, largely due to supply chain disruptions.

Tariff effects are not limited to the Visegrád Four. S&P Global has noted that the German auto industry is the primary pressure point for the Western Balkans too. Though the reciprocal tariffs are paused for the time being, initial rates were steep — Serbia faced a 37% tariff, Bosnia and Herzegovina 35%, North Macedonia 33%, and Moldova 31%. Albania, Kosovo, and Montenegro were hit with the 10% baseline. While US trade represents less than 2% of Western Balkans’ exports, indirect consequences from disrupted EU supply chains could weigh on regional growth forecasts. It’s worth noting that service exports were untouched. Serbia’s Information and Communication Technology exports to the US totaled €1.7 billion in 2024, making it the country’s largest services export market. North Macedonia is on a similar trajectory, with the US one of the fastest-growing destinations for its ICT sector.

The Baltic states would experience a hit in line with the broader EU — with GDP expected to fall by about 0.5%. Lithuania, where US-bound exports make up 6.8% of the total, faces similar supply chain vulnerabilities as its Central European counterparts. On top of that, a possible military threat from Russia adds to the region’s economic uncertainty.

The bottom line is that Central and Eastern Europe’s economies remain fragile, still reeling from fiscal deficits, post-COVID 19 inflation shocks, and the ongoing economic fallout from Russia’s invasion of Ukraine. Now, they face a triple hit — (1) US tariffs, (2) slowing Chinese demand for European cars, and (3) persistent geopolitical risks. Even if the reciprocal tariffs are eventually scrapped for good, the auto industry will still take a hit, and a growing sense of uncertainty will further strain these export-dependent economies.

— Giorgi Beroshvili, Editor