Trump’s tariffs pose less of a threat to Ukraine than the loss of trade privileges from the EU

The impact of additional tariffs introduced by US President Donald Trump in the short term will have a much smaller negative impact on the Ukrainian economy than the termination of the privileges for Ukrainian exports established by the European Union after the start of the full-scale invasion of the Russian Federation. This is stated in the Inflation Report for April 2025, published by the National Bank.

The National Bank recalled that the US applied the lowest tariff rate of 10% to Ukraine.

“It is expected that the direct impact of the new tariffs on the Ukrainian economy will be insignificant, since the volumes of domestic exports to the US market are quite small. In addition, individual Ukrainian exporters have the opportunity to reorient their supplies to other directions, and some of them may gain competitive advantages in the same US market in conditions of higher entry barriers for other countries,” the National Bank indicates.

The volume of Ukrainian exports to the US in 2024 amounted to only 2.2% ($0.9 billion) of total exports of goods. Its basis is formed by cast iron (42% of exports to the US), pipes (13%) and certain food products (15.8%, most of all – oil, honey and juices). According to the NBU, exports of metallurgical products will not undergo critical changes due to the relatively high share of cast iron imports in US consumption (about 20% in 2023).

However, the indirect impact of tariff wars on the Ukrainian economy will be stronger.

First of all, due to the slowdown in economic activity in the Eurozone and Central and Eastern European countries, which will likely lead to a decrease in demand for Ukrainian products.

This was one of the reasons for the deterioration of the forecast for Ukraine’s GDP growth to 3.1% in 2025, the NBU noted.

At the same time, this scenario assumes the continuation of the agreement on duty-free trade with the EU on similar or relatively close terms to the previous version.

The realization of the risk of termination of the agreement may have a significant negative impact on Ukrainian exports of goods, the National Bank warns.

“Returning to the 2021 agreement is considered a risk of the baseline scenario. If it is implemented, net losses in exports of goods may amount to about $1 billion per year. Greater losses can be avoided thanks to the opportunities for increasing supplies to African and Asian countries and the active development of new markets by Ukrainian exporters,” the National Bank report notes.

Ukraine and the EU are currently working on an updated trade regime, which should replace the system of autonomous trade preferences.

“The new system of tariff quotas will most likely be more favorable than returning to the terms of the free trade agreement. As a result, the negative consequences for Ukrainian exports may be even smaller,” the NBU concluded.

As reported, the European Commission does not plan to extend the privileges for Ukrainian exports established after the start of the full-scale Russian invasion, which provide for the unilateral abolition of duties on Ukrainian agricultural products and are valid until June 5.

After this date, a return to the trade regime that existed before the full-scale war is possible. However, as a compromise option, the possibility of making changes to the terms of the Deep and Comprehensive Free Trade Area (DCFTA) between Ukraine and the EU is currently being considered, in particular, increasing quotas for certain types of agricultural products from Ukraine.

Recall that in May 2024, the Council of the European Union approved the extension of the suspension of duties and quotas on imports of Ukrainian goods to the European Union for another year, but with additional safeguards to protect European farmers.

Tags: Ukraine, EU, USA