Volkswagen Passat was the first model ever to be produced in Bratislava after Volkswagen started vehicle production in Slovakia in 1991. (source: Courtesy of Volkswagen Slovakia)
When U.S President Donald Trump announced over the weekend new tariffs on goods from Canada, Mexico and additional tariffs on Chinese goods, he bluntly threatened that the EU would follow “very soon”. Meanwhile, on Monday night it was announced that US tariffs on goods from both Mexico and Canada would be delayed by a month. But while it is too early to assess what exactly Trump is pursuing, higher tariffs would be a problem for Slovakia.
For Slovak goods, tariffs would make them more expensive and therefore less competitive on the US market. This would result in a loss of market position for European or Slovak companies. This could be reflected in a fall in production, lower investment and, in the worst case, even redundancies.
There are three reasons why Trump is introducing the new tariffs, as quoted by the Sme daily. One is arrival of a large amount of illegal migrants and import of illegal drugs. The second reason is the domestic economy, which Trump wants to protect from foreign competition. The aim is to revive domestic companies thanks to a protective wall from abroad. The third reason are revenues as the tariffs would bring additional money into the federal coffers.
Impacts on Slovakia will be painful
Within the European Union, Slovakia will the most impacted country as it counts on the automotive industry. But customs policy is not in the hands of individual EU member states, so the Slovak government could not do much more than lobby for its interests in Brussels, for example, Denník N wrote.
In the event of an increase in tariffs, the automotive sector would see a loss of up to €300 million a year, warned the Association of Industrial Unions and Transport (APZD), which also highlighted the threat of job losses in the domestic economy in this context.
“If Donald Trump imposes trade tariffs against the EU as well, Slovak companies will be forced to face a dramatic overpricing of their products, which will reduce their sales on the US market and threaten hundreds of jobs in Slovakia,” Andrej Lasz from the association told Denník N.
If 10 percent tariffs are imposed on European cars, Slovak cars will become more expensive on the US market and their sales could fall by 6-9 percent, he said. If the tariffs put the brakes on exports, the first to be affected will be production workers, he said. In this regard, Lasz estimated that a 4-percent drop in exports could increase overall unemployment in Slovakia by 0.2 to 0.5 percentage points.
The association quantified that if trade wars intensify, Slovak exports could fall by up to €4.4 billion by the end of 2029. It stresses that this is only a prediction, which should be taken with a grain of salt.
Within the CEE region, US demand is the most significant for Slovakia. The value of Slovak exports to the US accounts for 6 percent of Slovakia’s GDP, the vast majority of which are cars, which are set to be hit by tariffs.
“If the promises of tariffs for the EU were to come to fruition, another of the negative impacts on our economy would come through a German slowdown,” said Matej Horňák, an analyst at Slovenská Sporiteľňa as cited by the Sme daily. “Based on calculations by the German Economic Institute and Erste Group Research, Slovak GDP growth would be lower by about 0.2 percentage points in 2025 and by about 0.5 points in 2026.”
How US-Slovak trade is intertwined:
In the first 10 months of last year, Slovakia exported nearly €90 billion worth of goods, of which nearly €3.7 billion went to the U.S., more than 4 percent of Slovakia’s exports.
In the case of cars, the importance of the US market is even greater. Up to 11 percent of all cars produced in Slovakia go to the US.
If tariffs were to be introduced, Bratislava-based Volkswagen and Nitra-based Jaguar Land Rover, which mainly export luxurious SUV models to the USA, would be hit the hardest.
Source: Denník N
