The global economic uncertainty, from a barrage of US tariffs, is reshaping trade flows across Europe and Central Asia, according to the European Bank for Reconstruction and Development’s (EBRD) latest regional economic report released today.
The EBRD analysis shows that tariff increases implemented by the US through mid-April 2025 have dramatically raised average effective tariffs faced by exporters in EBRD regions from 1.8% in 2024 to 10.5%. These include the 25% tariffs on steel, aluminium, and cars, alongside a 10% increase in blanket tariffs.
The Slovak Republic, Jordan, and Hungary are projected to face the largest negative impacts, with GDP reductions estimated at 0.8%, 0.6% and 0.4% respectively. In Slovakia, car exports account for 83% of the overall tariff impact, reflecting the country’s significant automotive sector exposure to the US market.
The report notes that policy uncertainty measures in the US and Germany have reached all-time highs. This uncertainty alone can significantly hamper investment and production, even before the direct effects of tariffs materialise.
While the US remains a key global export market, EBRD economies typically direct most exports toward Germany, other large EU economies, and increasingly China. Germany remains the largest trading partner for ten economies in the EBRD regions, accounting for more than 25% of exports from North Macedonia, Czechia, Poland, and Hungary.
The report highlights significant shifts in global trade patterns. China’s share in global car production rose from 3% in 1997 to 32% in 2023, whilst advanced Europe and the US saw their combined share fall from 51% to 23%. The EBRD regions increased their share from 3% to 7%, though with substantial variations – gains in Uzbekistan and Morocco, but declines in Czechia, Slovakia, and Poland.
China’s exports to the US and the EU are dominated by consumer electronics. Source: EBRD
Trade deficits with China remain substantial across the EBRD regions. All economies except Mongolia have trade deficits with China, with the largest imbalances in the Kyrgyz Republic (38% of GDP), Slovenia, and Uzbekistan (around 13% of GDP each).
Looking forward, the EBRD has revised its 2025 growth projection for its regions downward by 0.2 percentage points, now expecting average growth of 3% in 2025 before picking up to 3.4% in 2026. These revisions reflect “increased global policy uncertainty, weaker external demand and the direct and indirect effects of the announced increases in import tariffs”.
While tariffs have a substantial direct impact, indirect effects through global value chains could further propagate economic disruption, including to economies with limited direct exports to the US. However, some mitigating factors exist, particularly potential trade diversion due to relative changes in tariff rates.
The EBRD analysis suggests economies facing lower relative tariffs than competitors in the US market could gain market share. However, this report does not account for the recent decision that the US and China have decided to de-escalate their trade war and slash reciprocal tariffs by 115%.
The report concludes that continuing geopolitical tensions, trade policy uncertainty, and potential slowdowns in key trading partners like Germany and China represent significant risks to the region’s economic outlook.
