Central Europe to feel impact of any US tariff hit to Germany

By Gergely Szakacs

BUDAPEST (Reuters) - If U.S. President-elect Donald Trump delivers on a pledge to hit European imports with tariffs, Hungary will feel the effects "exponentially" because of its German trade links, a top business leader said on Thursday.

Germany is expected to be more affected by any U.S. tariffs than other euro area members, Nomura forecasts, which will have a knock on effect on Central Europe given its deep trade ties.

These are particular strong in the automotive sector, with the region sending 20% to 30% of its exports to Germany.

The U.S. election result has raised new risks for Europe's largest economy, whose stagnation has dented recovery prospects in export-reliant central Europe, said Andras Savos, President of the German-Hungarian Chamber of Industry and Commerce.

"If the President-elect delivers on what he and the people around him have promised and the U.S. clams up completely and pursues the flagged policies, that will deal another blow to the German economy," Savos told a media briefing.

"If the German economy is struck, this will affect us (Hungary) exponentially," he said, adding that planned investments in Hungary were in an "astonishing" nosedive.

Economists at ING said central Europe was "fully exposed" to the ramifications of the planned overhaul of U.S. trade policy despite relatively lower direct ties.

"The main exposure is through the trade link with Germany and the focus on automotive, which seems like the worst combination as we look to the future," ING said.

"We believe that market expectations for a recovery next year in the CEE region are overly optimistic, and we will see further downside surprises."

German auto exports to the U.S. were worth 23.41 billion euros in 2023, compared with car exports worth 18.92 billion euros to Germany from Poland, Romania, the Czech Republic, Slovakia and Hungary, Eurostat figures showed.

Eurostat and UN Trade and Development (UNCTAD) could not provide a breakdown on the share of cars and car parts exported to the United States from central Europe through Germany.

(Reporting by Gergely Szakacs; Editing by Alexander Smith)