Fundamentally, the immediate impact of the US government's rather erratic tariff policy on the markets in Central and Eastern Europe (CEE) is no different from what we are seeing in other global or European markets. Massive uncertainty and volatility are just as prevalent in the CEE markets as in their Western European neighbors. In this respect, the main risk here also lies in a further escalation with China, where any response from the EU should continue to be pragmatic and balanced. However, in its scenarios, the American Peterson Institute for International Economics does not even see the strongest negative effects on the US and the rest of the world in the tariff policy, but rather in the risk that Trump will question the independence of the Fed.
Economic effects
Easing of debt rules and fiscal programs should complement existing EU support programs in the region. However, the very unpredictability of US tariff policy also calls into question the previously expected relative recovery in Europe.
The direct economic impact on the CEE region should remain fairly manageable. However, close integration into international supply chains (mainly via Germany) will ensure that CEE countries also suffer economic damage. Direct exports to the US are relatively low, with Austria, Slovakia, and Hungary taking the top spots. The share of exports to the US (% of extra-EU exports, 2023) ranges from 22% for Austria to just under 14% for Hungary. Hungary and Slovakia are mainly affected here by the (largely unlisted) automotive sector. We have currently adjusted our forecasts for real GDP growth in the region to 2.4% for 2025 (AT -0.5%) and, in anticipation of a stronger effect in 2026, to 2.9% for this year for CEE (AT 0.3%).
Impact on companies
In a survey conducted at the end of 2024, only 8% of regional companies said they were significantly affected. The majority of respondents said they were only marginally affected or not affected at all by the US tariffs (40%), while a further 30% expected indirect effects via their supply chain.
Even if regional companies are likely to be only indirectly affected, we do see an immediate reaction in the consensus estimates for corporate earnings growth. However, following this immediate reaction, there is currently a slight upward correction in these estimates. Earnings growth of around 9% is currently expected for the CEE region over a 12-month horizon. Coupled with a valuation that remains more than comfortable, we should expect the markets in Austria and CEE to continue to benefit from any shift in fund flows away from the US and toward Europe.
Banks could be affected by an accelerated reduction in interest rates and lower demand for credit due to economic weakness and consumer sentiment. This consumer sentiment may also be reflected in consumer goods results. Expected increased competition from Chinese companies in European markets could mean lower costs, but also displacement competition. Depending on the extent of their supply chains, industrial companies in the region are likely to be the hardest hit.
Pharmaceutical stocks may have a good chance of remaining largely exempt from tariffs. Energy, utilities, and telecommunications stocks may face weaker demand, but should still feel the least impact in comparison.
Author:
Henning Eßkuchen
Head of CEE Equity Research, Erste Group Bank AG
5 May 2025
 |  |
Note
Wiener Börse AG would explicitly like to point out that the data and calculations given in this report are historic values, which do not permit any conclusions as regards future developments or value stability. Price fluctuations and loss of capital are possible in securities trading. The contribution is the personal opinion of the analyst and does not constitute a financial analysis or a recommendation for investment by the exchange operating company, Wiener Börse AG.