EU trade deal slows growth of Czech economy substantially

Prague is facing economic adjustments due to a new trade agreement between the European Union and the United States. The agreement includes a blanket 15 percent tariff on goods exported from the EU to the USA, which analysts predict will negatively impact the Czech economy's growth. Specifically, economic experts estimate that this tariff could lead to a decrease in GDP growth ranging from 0.3 to 0.4 percent. Sectors most affected are engineering, electrical engineering, electronics, and the chemical and pharmaceutical industries. Reports from the Vice Chairman of the Exporters Association, Otto Daněk, indicate that some Czech companies have already begun relocating production to the USA because of these tariffs. Coalition politicians have characterized the agreement as the maximum feasible option, highlighting that it provides essential stability and predictability for trade relations between the EU and the USA. They believe this stability mitigates the risk of a trade war and lowers uncertainty that has dampened investment activities across vital European sectors. The Czech automotive industry, although not heavily reliant on the USA as a direct export market, is expected to experience indirect impacts through the export of components to Germany, a key trading partner. In fact, exports to Germany represent about 30 percent of Czech production, which is often integrated into products sold in the US market. The trades agreement has been seen as a compromise that maintains a level of predictability in trade. From an agricultural perspective, the agreement is viewed favorably, suggesting it will not significantly affect Czech agricultural exports. Moreover, analysts suggest that diversifying trade relationships is necessary for the Czech economy to achieve long-term stability and growth amid global geopolitical uncertainties.