US, EU trade policy measures work against economic growth in Hungary

HUNGARY - In Brief 07 May 2025 by Istvan Racz

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Well, this looks like a series of unfavourable news now. Here is a list of what we mean: 1. A few days ago, Mr. Trump's 25% tariffs on the imports of car components took effect, following a similar measure on the imports of complete cars, implemented one month earlier. Naturally, these moves affect the European, including the Hungarian, car industry negatively. The direct impact on Hungary, mainly through the exports of one of the world's largest car engine factory, Audi's in Győr, to the US will be small (less than 0.1% of GDP). But the indirect impact, through the possible decrease of orders from mainly German parent companies and other partners, and also potentially through the slowdown of parent company investment into Hungary may be much more significant. The latter is very difficult to quantify, of course, and even a change in the opposite direction will be possible. This would come about if European carmakers, feeling added pressure on profitability, decided to move production more towards low-cost areas, including Hungary. Of course, Hungary's Economy Ministry loves to stress this latter possibility. At present, the car industry may give up to 10% of Hungary's GDP in the broad sense, including all the metallurgy, plastics, rubber (tyres) and other production that provides the local car industry with domestic supplies. Ongoing major investments in car and battery production facilities include those of BMW, Mercedes, CATL, and BYD, etc. The government attach high hopes to some of these coming on stream soon, saving Hungary's ailing GDP growth from late 2025 and much more in 2026. But there were signs of moderate slowdown in the implementation of these projects al...