US-EU tariff war could cost Lithuania up to 1 pct of GDP - central banker

VILNIUS - With the US set to impose 20 percent tariffs on EU goods, Lithuania's economic growth could decelerate by up to 1 percentage point over the next four years in the worst-case scenario, Gediminas Simkus, the central bank governor, said on Tuesday.

"As for the potential impact on Lithuania, if a 20-25 percent tariff were introduced on EU goods and certain retaliatory measures were taken, in the worst-case scenario, (...) this could reduce GDP by up to 1 percentage point over the next four years," he told LRT Radio.

Simkus explained that the effect would be somewhat limited because Lithuania's exports to the US make up only around 5 percent of the total, and there is also an exemption list, meaning that about a third of these exports would not be subject to tariffs.

He also noted that Lithuania exports higher-value products to the US, where margins are slightly higher, and the tariff burden would be shared between producers, sellers, and buyers.

According to Simkus, it is impossible to precisely assess the impact of tariffs on Lithuania.

"Lithuania is deeply integrated into various production chains. The impact would be greater on other EU countries (...). Through our exports to these countries and our participation in production chains, there would also be an indirect impact on us and perhaps it would be even a bit stronger," he said.

According to Simkus, it is uncertainty, not the tariffs, that has the biggest negative impact on the economy.

A month ago, the central bank governor said that if the US imposed 25 percent import tariffs on EU goods and the bloc retaliated, this scenario could shave 0.33 to 1.3 percentage points off Lithuania's economic growth over four years.

The Economy and Innovation Ministry forecasts that tariffs could shrink Lithuania's economy by about 0.65 percentage points over three to four years

Direct Lithuanian exports to the US totaled 1.6 billion euros last year, accounting for about 6.8 percent of total exports of Lithuanian-origin goods.