Trade war between Trump and the world could hit Romania hard, Central Bank warns

Romania could be hit by the global trade war via the trade channel both directly and indirectly, in a scenario that assumes an extension of higher import tariffs, according to the latest inflation report of the National Bank of Romania (BNR), released on Wednesday.

“On the external front, a risk factor that became more relevant over the past few months is the further escalation of trade protectionism,” the central bank said.

The central bank considers two scenarios: a moderate one, based on the current assessments, starting from the measures already in place – higher import tariffs.

These measures “point to a marginal impact on the global economy”.

But in a scenario that assumes an extension of these measures to a wide range of goods as well as their implementation by all trading partners, “the negative effects could become considerable”, BNR experts say.

“In such a case, Romania’s economy would be affected via the trade channel both directly and indirectly, as a result of weaker external demand and higher prices of imported goods, also amid the – highly likely – increase in global risk aversion, with an impact on the exchange rate of the leu versus the major currencies,” the report indicates.

The central bank estimates international commodity prices – energy prices in particular – as a major risk factor, amid the recent developments in oil prices and elevated volatility on international markets in the past year.

A recent BR Analysis showed that a trade war between the main global economies triggered by rising import tariffs could hit Romania, a member of the European Union, through several channels, mainly by imported inflation, lower foreign investment and higher unemployment rates.