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Research Briefing | Mar 20, 2025

No shelter from the external storm for CEE economies

The small, open economies of Central and Eastern Europe (CEE) are struggling against three external headwinds simultaneously: stuttering German industry, protectionist US trade policy, and overcapacity in China’s manufacturing sector.

What you will learn:

  • With German industry plodding through a mix of cyclical and structural weakness, CEE manufacturers integrated in the German automotive supply chain have struggled. The cyclical recovery driven by lower rates that we expect to take hold in H2 will solve only part of the problem.
  • CEE economies are also vulnerable to tariffs. President Trump is following through on his tariff pledges and CEE countries, with their integration in global supply chains and persistent trade surpluses, will be hit twice as hard as the Eurozone average.
  • Finally, developments in China pose an indirect but potentially severe threat. China’s manufacturing sector is producing at overcapacity (often subsidised) due to weak domestic demand. EU firms are already struggling to compete. Re-routing of trade due to US tariffs might intensify this competition.
Tags: CEEDeindustrialisationExportsManufacturingTariffsTrade policy
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