The EU agreement with the USA will slow the growth of the Czech economy by tenths of a point, analysts said

Prague – The EU’s trade agreement with the USA, which includes a blanket tariff of fifteen percent, is expected by analysts to slow the growth of the Czech economy by several tenths of a percentage point. However, from an economic perspective, they believe it is more important that it mitigates the risk of high sectoral tariffs, which have increased uncertainty and dampened investment activity in key European sectors. According to exporters, the announced tariffs on goods from the EU are currently the maximum possible. The Vice Chairman of the Exporters Association Otto Daněk told ČTK today that he already has information that the first Czech companies are relocating production to the USA.

Coalition politicians describe the agreement as the maximum possible, appreciating primarily that it brings stability and predictability. “The introduction of a 15 percent import tariff on goods exported from the EU to the USA is expected to negatively impact the GDP of the Czech economy by 0.3 to 0.4 percent,” said Deloitte analyst David Marek. According to him, the most affected sectors will include engineering, the production of electrical engineering and electronics, and the chemical and pharmaceutical industries. A relatively positive report comes from the lower final tariff on automobiles, which will lead to less negative impacts on the largest trading partners, namely Germany and Slovakia, added the economist of the Czech Banking Association Jaromír Šindel. According to analysts, the agreement mitigates the risk of high sectoral tariffs, which have increased uncertainty and dampened investment activity in key European sectors.

Thanks to the trade agreement, the EU has avoided a trade war, but the agreed tariff may still significantly affect certain sectors, according to the director of the international relations section of the Czech Confederation of Industry and Transport Lukáš Martin. “On the other hand, the agreement brings more predictability in trade relations between the USA and the EU and minimizes the impacts on businesses compared to what would happen in the case of a full-blown trade war,” Martin told ČTK. According to the president of the Czech Chamber of Commerce Zdeňka Zajíčka, the Czech Republic must seek new business opportunities outside traditional markets. “Diversifying trade ties and seeking additional outlets for Czech goods and services is a necessary step towards long-term stability and growth of the Czech economy in times of geopolitical uncertainties and changing conditions in global trade,” Zajíček believes.

The director of the Association of Engineering Technology Ivo Červenka told ČTK today that tariffs may indirectly but significantly affect Czech manufacturers of machining and forming machines. They will mainly negatively impact those who export goods to Germany, which are then sold to the United States. Germans may reduce demand for Czech products due to more expensive exports, which could also lead to a decrease in domestic production, he stated.

For the Czech automotive industry, the USA is not a significant direct export market. In 2023, 0.8 percent of domestic automotive exports worth 9.3 billion crowns were directed to the USA, with finished vehicles not being the subject. The impacts of the new agreement, according to the executive director of the Automotive Industry Association Zdeňka Petzla, will be predominantly indirect, especially through the export of components to Germany, which receives 30 percent of exports and is the main buyer of Czech production while also being a significant exporter of finished vehicles to the USA. In this context, according to Petzl, it is important that the EU and the USA declare their willingness to continue removing trade barriers and strengthening strategic partnerships.

From the perspective of Czech agriculture, the agreement is an acceptable compromise and should not have a significant impact on Czech agricultural exports. However, caution remains among farmers, as it is still unclear which commodities and in what final form the tariffs will apply. This is evident from the statements of agricultural non-governmental organizations, which also point out the so-called domino effect, as agriculture depends on a number of other sectors. (July 28)