CEE markets plunge on Trump tariffs shock

Stock markets in Central and Eastern Europe (CEE) fell sharply after US President Donald Trump announced retaliatory tariffs on global imports on 2 April 2025, spooking the region’s export-dependent economies and reviving fears of a wider economic slowdown.

CEE Stock Market Weekly Performance to 7 April 2025

Most exposed: Poland, Slovakia, Hungary

The divergence in market performance across CEE reflects levels of exposure to global trade flows, particularly with the US, China and Germany, with economies reliant on manufacturing and automotive exports especially vulnerable.

Fears of shrinking global demand and supply chain disruptions triggered broad sell-offs in Warsaw, Bucharest and Budapest, with local indices falling between 5% and 7.5% over the week.

Czechia saw a similarly sharp correction, as its PX index dropped below the symbolic 2,000-point mark. Analysts linked the fall to uncertainty in industrial production and investor concern over Czechia’s limited room to pivot away from German-led manufacturing exports.

Hungary, Poland and Romania were among the hardest hit, due to their dependence on manufacturing exports and close ties to Germany’s industrial supply chains, particularly in the automotive and machinery sectors. S&P Global said: “Higher tariffs and weaker Western European demand could weigh on growth in Czechia, Hungary and Slovakia”. In Slovakia, exports make up 76.6% of GDP.

Polish Prime Minister Donald Tusk warned that the new tariffs could shave 0.4% off Poland’s GDP, amounting to losses exceeding PLN 10bn (USD 2.63bn), reflecting Poland’s similarly heavy exposure to industrial exports, especially in auto and machinery.

CEE governments have not announced coordinated countermeasures. Most central banks are holding interest rates steady, but pressure is building to provide targeted support for exposed sectors. Bank of Greece Governor Yannis Stournaras warned that the tariffs could reduce eurozone growth by up to one percentage point. “This is a severe negative demand shock,” he said, predicting weaker activity and inflation across the EU.

Baltics, Balkans less hit

By contrast, the Baltic states have shown relative resilience. Lithuania’s OMX Vilnius rose 5.38% year-to-date, while Estonia and Latvia posted more modest gains. Analysts attributed this to the region’s more diversified economies, lower direct exposure to trade with the US and China, and increased investor interest in local tech and green sectors. Estonia’s digital economy and Lithuania’s fintech growth have helped cushion broader risk-off sentiment in the region.

In the Western Balkans, the shallower capital markets of Bosnia and Herzegovina, Montenegro and North Macedonia absorbed the shock with more muted reactions. Analysts caution that lower liquidity and limited foreign exposure may delay the full pricing-in of external shocks, rather than signal genuine market insulation.

Recession risk rising

Market reactions have been swift and sharply negative. Investor sentiment has plummeted, with the Eurozone’s Sentix index falling to -19.5 in April from -2.9 in March, its lowest reading since October 2023.

Trump’s framing of the tariffs as designed to protect US industry failed to convince European leaders. Outgoing German Chancellor Olaf Scholz called Trump’s tariffs policy “fundamentally wrong”, while French President Emmanuel Macron described it as “brutal and unfounded”.

European Commission (EC) President Ursula von der Leyen called the tariffs “a massive blow to the global economy and consumer welfare”. The EC is considering retaliatory measures, and China has criticised the US imposition of relatiatory tariffs as protectionist.

Lukasz Janczak, analyst at Erste Securities, said the tariffs were expected in principle but not in scale. “The very fact of introduction was expected, but the scale of these tariffs is a very negative surprise here, and investors are trying to somehow reflect this,” he told news agency Reuters.

S&P Global warned that the US tariffs ‘will likely dent growth prospects in Central Europe,’ underscoring the vulnerability of the region’s export-dependent economies amid escalating trade tensions.

Justin Onuekwusi, Chief Investment Officer at St James’s Place, said retaliation is now almost inevitable. “Retaliation against Trump’s tariffs is likely, but it’s clear countries will think about how to retaliate in a politically astute way,” he said.

BlackRock CEO Larry Fink said most CEOs he speaks with already believe the US is in recession due to the trade measures. Goldman Sachs raised its US recession probability from 35% to 45%, while Barclays warned the EU and UK could enter recession in the second half of 2025.