U.S. tariff hikes to slow Lithuania's economic growth by 0.36 to 0.82 pp: economist
VILNIUS, June 10 (Xinhua) -- The combination of falling external demand and heightened uncertainty caused by the U.S. tariff hikes could shave 0.36 to 0.82 percentage points off Lithuania's economic growth this year, according to an economist from the Bank of Lithuania.
Kasparas Vasiliauskas, an economist at the central bank, said on Tuesday that the impact on Lithuania comes through both direct and indirect channels, with the latter playing a more substantial role due to the country's deep integration into global supply chains.
"The United States is Lithuania's most important non-European Union (EU) export market, and its significance has been steadily increasing," Vasiliauskas said. "Higher U.S. tariffs raise the cost of Lithuanian goods in the American market, reducing their competitiveness and potentially leading to lower demand and turnover."
He explained that while bilateral trade is affected directly, the broader concern stems from Lithuania's role in producing intermediate goods and services for EU manufacturers. These are often incorporated into final products destined for the U.S. market. "Even if the final goods are not exported directly from Lithuania, the added value generated here is exposed to risk through indirect trade links," Vasiliauskas noted.
Lithuania's key trading partners, such as Germany, Sweden, Denmark, and the United Kingdom, are major exporters to the U.S. and are likely to see reduced demand due to the new tariff hikes. This, in turn, could lead to lower demand for Lithuanian inputs, hitting exports, business revenues, and overall gross domestic product (GDP), he explained.
"The extent of the economic impact varies based on different tariff scenarios modeled," Vasiliauskas added.
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