US Tariffs to Hit Czechia and Slovakia Hard – S&P Global Warns

Czechia, Slovakia, and other Central European countries could face serious economic setbacks as the United States plans to impose 25% tariffs on imports from the European Union, according to a report from S&P Global.

The German auto sector, a key driver of Central Europe’s economy, is expected to be particularly affected.

Although the Trump administration has yet to confirm the start date for these tariffs, their implementation could hamper economic growth across the region and exacerbate existing budgetary issues, S&P Global warned on Monday.

Czech and Slovak Economies at Risk

Despite limited direct trade exposure to the U.S., the economies of Czechia, Slovakia, Hungary, Slovenia, and Romania are heavily tied to the German auto industry, which would suffer from reduced American demand, S&P Global said.

Machinery and transport equipment exports to Germany account for over 10% of total exports in these countries, making them vulnerable to any downturn in the sector.

Central European economies are among the most export-dependent in the EU. According to Eurostat’s 2023 data, exports make up 92% of Slovakia’s GDP and 69% of Czechia’s GDP—both well above the EU average. Romania is the only exception, with 39%.

Growth Slowdown Expected

According to Nicholas Farr, an analyst at Capital Economics, a 25% tariff on EU imports to the U.S. could reduce GDP growth in Central Europe by 0.5 percentage points—a larger drop than previously forecast.

The potential economic slowdown comes at a time when inflation remains high following Russia’s 2022 invasion of Ukraine, and Germany—Central Europe’s largest trading partner—faces ongoing economic struggles.

However, S&P Global analysts suggest that weakening Chinese demand for German cars may have an even greater impact on Central Europe than U.S. tariffs. German manufacturers Volkswagen, Mercedes, and BMW generate nearly one-third of their sales in China, compared to just 10-15% in the U.S.

Fiscal Deficits Could Worsen

S&P Global also warned that slower growth in Central and Eastern Europe could worsen existing fiscal challenges. The European Commission has already launched disciplinary procedures against seven EU countries, including Hungary, Poland, and Slovakia, over large budget deficits. Romania currently has the largest deficit in the EU.

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