Special Report on Trade Development in the Central and Eastern European Region ()

Key Chapter Title List

1. Trade Uncertainty Surges After US Election
2. Global Supply Chain Pressures Remain Manageable
3. 2024 Global Trade Recovery Trend
4. Supportive Role of Declining Tariffs on Trade Activities
5. Trade Activities and Their Impact on Economic Performance
6. Increased Trade Openness in the CEE Region
7. Export Flows and Trade Partners of the CEE Region
8. Growth in Service Exports in the CEE Region
9. Impact of Trade on Employment
10. Shift from Current Account and Trade Deficits to Surpluses
11. Negative Impact of Tariff Hikes on US and Global Trade
12. Industries and Countries in the CEE Region Vulnerable to Tariff Shocks

Document Introduction

This report, published by Erste Group on January 30, 2025, focuses on core issues of trade development in the Central and Eastern Europe (CEE) region. Against the backdrop of the evolving global trade landscape, it provides an in-depth analysis of regional trade dynamics, influencing factors, and economic effects. The report's core research questions revolve around key variables such as trade policy uncertainty, supply chain stability, and tariff changes, exploring their comprehensive impact on trade openness, economic growth, the job market, and balance of payments in the CEE region.

The report begins by analyzing the surge in Trade Policy Uncertainty (TPU) following the US election. It points out that after Donald Trump was elected the 47th President of the United States, although he has not immediately announced tariff hikes on all trading partners, his planned 25% tariffs on Canada and Mexico have already increased uncertainty in global trade development. A similar situation occurred during the 2018-2019 period when the US imposed tariffs and triggered retaliatory measures. Simultaneously, the report clarifies that global supply chain pressures remain manageable, with the World Container Index and the Global Supply Chain Pressure Index not indicating significant supply-side issues. The achievement of a Gaza ceasefire agreement also provides support for stable trade flows.

Regarding trade scale and tariff trends, the report cites data from the United Nations Conference on Trade and Development (UNCTAD), indicating that global trade volume in 2024 will reach a historical peak of nearly $33 trillion, an increase of $1 trillion year-on-year. Service trade growth of 7% is the main driver, while goods trade grew by 2%, still below the 2022 peak. On tariffs, global average tariffs showed an overall declining trend from 2002 to 2022, with import tariffs on intermediate goods, capital goods, and raw materials being particularly low. However, the US tariff hikes in 2018-2019 triggered retaliatory actions, causing a temporary rise in tariff levels.

Focusing on the CEE region, the report highlights the characteristics of regional trade openness: Over the past two decades, trade openness has increased significantly in all CEE countries. Slovakia, Slovenia, and Hungary are the most open, with the sum of imports and exports accounting for 160%-180% of GDP, while Romania is relatively closed. Within the region, 70%-80% of trade occurs within the EU, with Germany being the main trading partner. Intra-regional trade is also substantial, reaching $237 billion in 2023 among CEE countries. Furthermore, the share of service exports in GDP has been continuously rising in the CEE region, with Croatia, Poland, and Slovenia performing particularly well, and the service sector's surplus is expanding.

The supportive role of trade for employment is also a core part of the report. Data shows that EU trade activities create jobs for 38 million Europeans. Extra-EU trade supports 18% (Hungary, Romania) to 30% (Croatia) of jobs in the CEE region, with export-related employment concentrated mainly in the service sector. Regarding the balance of payments, the report notes that, apart from a general decline in current account balances across CEE countries in 2022, the regional current account situation has significantly improved over the past two decades, with an increasing number of countries achieving trade surpluses. The service sector has played an increasingly important role in this shift.

The report concludes with a warning that if the new US administration implements its tariff hike plans, it will negatively impact global trade, with industries such as machinery, electronics, and electrical machinery being the hardest hit. For the CEE region, automobiles and pharmaceutical products are the areas most vulnerable to tariffs. Slovakia and Slovenia face higher vulnerability due to insufficient diversification of their exports to the US. Overall, the EU remains the most critical trading partner for the CEE region. Regional trade is closely linked to manufacturing and overall economic performance, and the currently high trade policy uncertainty has already significantly impacted the business environment.