Hungary Faces Exponential Impact from U.S. Tariffs

By Gergely Szakacs

BUDAPEST (Reuters) – If U.S. President-elect Donald Trump follows through on his promise to impose tariffs on European imports, Hungary will experience the consequences "exponentially" due to its strong trade ties with Germany, warned a leading business figure on Thursday.

Germany is projected to be more vulnerable to any U.S. tariffs compared to other eurozone countries, according to Nomura, which anticipates significant repercussions for Central Europe due to its interconnected trade relationships.

The automotive sector is particularly impacted, with the region exporting between 20% to 30% of its products to Germany.

The results of the U.S. election have presented new challenges for Europe's largest economy, whose stagnation has negatively affected recovery prospects in Central Europe, noted Andras Savos, President of the German-Hungarian Chamber of Industry and Commerce.

Savos remarked, "If the President-elect enacts his proposed policies, it could inflict additional harm on the German economy, and by extension, drastically affect us (Hungary)." He also highlighted that planned investments in Hungary are experiencing an exceptionally steep decline.

Economists at ING emphasized that Central Europe is "fully exposed" to the impacts of the U.S. trade policy overhaul, despite relatively lower direct economic connections. They noted, "The main vulnerability lies in the trade links with Germany, particularly concerning the automotive industry, which appears to be the worst-case scenario moving forward."

The analysts expressed skepticism about market forecasts for recovery in the Central and Eastern European (CEE) region next year, predicting further negative surprises.

According to Eurostat, German auto exports to the U.S. reached a value of €23.41 billion in 2023, compared to €18.92 billion in car exports from Poland, Romania, the Czech Republic, Slovakia, and Hungary to Germany. Eurostat and UN Trade and Development (UNCTAD) were unable to specify the proportion of cars and car parts exported from Central Europe to the U.S. via Germany.