NBU believes influence of new U.S. tariffs on Ukrainian economy to be insignificant

MOSCOW. April 25 (Interfax) - The National Bank of Ukraine (NBU) has forecast that a direct impact of the new duties of the United States on Ukraine's economy would be insignificant due to small volumes of export to the U.S.

"The U.S. drastically increased duties for the majority of its trade partners in early April, but did so differentially, therefore, Ukraine ended up among perhaps the least affected states," Ukrainian media outlets cited the NBU's Inflation Report for April as saying.

The NBU explained the fact that the U.S. defined the lowest duty rate of 10% for Ukraine by the positive bilateral trade surplus with the U.S.

The direct negative impact of the new tariffs on Ukraine's economy is expected to be insignificant. At the same time, separate exporters may reorient supplies or receive advantages on the U.S. market amid growing barriers for other countries.

Meanwhile, the indirect impact of the tariff wars on the economy of Ukraine will be tangible due to the expected slowdown of growth in its trade partner countries, in particular, the Eurozone and Central and Eastern Europe, which would reduce the external demand, the NBU said. It partly contributed to the decrease in Ukraine's GDP forecast for 2025 to 3.1%. At the same time, the NBU expects the slowdown to be short-term and the economic growth to resume in 2026-2027.

The NBU's evaluations of the tariff wars' limited impact on Ukraine are based on the structural features of its economy, a significant share of agricultural exports and the dependency on imports of energy sources. In particular, the demand for agricultural products is less sensitive to global fluctuations, and a possible decline of oil prices could reduce expenses.

"The NBU's forecast also does not envisage a significant impact of the tariff wars on inflation processes in Ukraine," the NBU said.

A collateral effect of the tariff wars, an acceleration of de-globalization processes and the growth of geopolitical polarization in the world, could be one of the long-term risks for Ukraine, but this process is not new and it has continued in the previous years, albeit much slowly, it said.

The NBU noted regarding the consequences of the tariff wars for the monetary policy that amid the growing uncertainty and instability on the finance markets the bank would continue adhering to the principles of flexible inflation targeting to maintain confidence in its polity and uphold macrofinancial stability.

"In case trade conflicts exacerbate, and currency wars start in the world, the NBU will also be ready to ensure the appropriate exchange rate flexibility to avoid the accumulation of significant external economic imbalances," the NBU said.

Even amid growing uncertainty the NBU would continue operating actively on the foreign exchange market compensating for the currency shortage in the private sector and restraining moderate fluctuations of the exchange rate, it said.