Hungary and Slovakia to be hit the hardest by tariffs

Today, we focus on cumulative direct impact of 20% tariffs on all US imports from EU at the top of those already announced on cars and metals. Although the regions direct trade exposure to the US is not too extensive, the impact would obviously be negative. Value added created in CEE countries embedded in imports to the US (direct and indirect) ranges between 1.7% to almost 3.6% of their total value added. Hungary and Slovakia have the highest exposure, and these two countries would suffer the biggest cumulative loss amounting to as much as -0.8 percentage points of GDP. In Czechia, Poland and Slovenia the loss is about -0.5 to -0.6 percentage points, while Croatia and Romania seem to be least exposed with negative impact evaluated at -0.4 percentage points. The overall impact, however, would include the indirect effects steaming through the shock of our main trading partners (Germany and Eurozone) and would be much larger at the end. With current growth forecasts between 2% and 3.8% in 2025 in all CEE countries, we believe, however, that economies would avoid recession this year. The positive effect from potential fiscal stimulus would be whipped off, however.