How will U.S. imposed tariffs affect Latvian export and economy in general?

The United States accounts for just under 3% of Latvia’s goods exports, which corresponds to a little over 1% of Latvia’s GDP.

Steel, and aluminum products, which have been subject to tariffs so far, make up approximately 3.5% of Latvia’s exports to the U.S. Therefore, the direct impact of the tariffs imposed so far on Latvia’s economy is very small. The direct impact of other proposed tariffs, such as those on pharmaceuticals, would also likely be relatively minor.

However, it is important to note that additional tariffs are likely to be imposed in the future. While the U.S. is not a dominant market for Latvian exports, it remains significant, especially considering the crucial role of exports in Latvia’s economy.

The direct impact of U.S. tariffs on Latvia would, however, likely remain relatively small. Estimates of the GDP impact of 10% reciprocal tariffs for eurozone countries range between 0.1% and 0.3%. Given the high importance of exports to the Baltic economies, the impact on Latvia would likely be at the upper end of this range.

Increased trade barriers and disruptions in international supply chains would likely reduce both investment and exports to other countries as well. A significant share of Latvia’s exports consists of investment goods, so a decline in global investments would negatively impact Latvian exports.

Uncertainty in global trade has already increased, and the potential introduction of additional tariffs would further contribute to this uncertainty. It is highly possible that the economic impact of increased uncertainty could be greater than the direct effects of the tariffs themselves, including for Latvia.

Joona Widgren
Senior Economist