Latvia is carefully evaluating the potential economic repercussions of trade tariffs imposed by the United states. A recent broadcast, “Attention – Economics,” highlighted the nation’s readiness to support businesses facing challenges due to these tariffs. The discussion centered on whether Latvia has adequate support policies in place and if the weakening U.S. dollar could offset the negative effects on exports.

Government Prepared to Act

Economy Minister viktors Valainis stated that while immediate action isn’t necessary, the government is prepared to provide assistance if needed. If we need it, we will help, just as we did in the energy price crisis, Valainis said.

Uldis rutkaste, head of the Bank of Latvia’s Monetary Policy Bureau, noted the government’s experience in deploying support tools. He explained that while initial responses during the pandemic were slower,established mechanisms and approaches now allow for a much faster reaction if required.

Limited direct Impact Expected

Kaspars Rožkalns, chairman of the board of the Exporters’ Association, emphasized that support should only be provided when necessary. There is no need to provide support when not, rožkalns stated.

Rožkalns pointed out that the U.S.is not among Latvia’s top three export markets, limiting the direct impact of tariffs. However, indirect effects through supply chains in Nordic countries and the European Union could be more significant.

Available Support and Potential Adjustments

Minister Valainis highlighted the availability of €250 million in support tools from the Ministry of Economy. Specifically due to tariffs, there was no need for support to support, but if we arise, we will quickly adjust, Valainis said.

The minister estimated that tariffs could affect specific companies exporting approximately €363 million worth of goods to the U.S. annually. While total exports to the U.S. reached about €500 million last year,not all exporters will require support. High value-added products, such as internet routers and optical fibers, may maintain demand even at higher prices in the U.S. market.

Economic Scenarios and Exchange Rate Considerations

Rutkaste indicated that direct exports to the U.S. account for only about 2% of Latvia’s total exports. The indirect impact through Nordic countries and EU supply chains could be around 4%.

The bank of Latvia has modeled various scenarios, including a 25% tariff on all EU goods, which could directly affect the Latvian economy by 0.5% of its gross domestic product (GDP). Rutkaste stressed the importance of considering exchange rates and economic reactions. Unlike the dollar’s strengthening during the previous presidency, its current weakening could amplify the negative effects of tariffs. The overall impact on the Latvian economy could reach up to 1% of GDP.

Waiting and Watching

Rožkalns emphasized the need for a cautious approach. Decisions have not yet been made, and the amount of threat and possibility is unknown. If the US is no longer a reliable partner, Europe will be able to look for new markets and new production base, rožkalns said.

Participants in the “Attention – Economics” broadcast agreed that while the situation is serious, it is not yet critical. The direct effects are limited, but vigilance is essential.Continuous analysis, careful observation, and swift responses are necessary to protect the competitiveness of Latvian companies.