Every year, about one million cars roll off the production lines in Slovakia, making this Central European country with a population of 5.4 million the world's largest car producer per capita. And this, in turn, makes it the most affected in Europe by the tariffs on car imports imposed by US President Donald Trump.
The automotive industry is the backbone of the entire economy
The automotive industry makes up 11% of the Slovak economy. Exports generate over 90% of the country's GDP, and car exports account for 30% of sales abroad. In 2023, Slovakia exported cars worth 4.3 billion to the US. euros, and several billion more were earned from car parts made in Slovakia.
The heavy dependence on the automotive industry and the imposed US tariffs means that the consequences will be felt quickly in Slovakia, analysts predict. "Small and open economies like Slovakia are likely to feel the consequences quite quickly", Richard Grievson, deputy director of the Vienna Institute for International Economic Research, told DW.
„Jaguar Land Rover“ (JLR), one of four car manufacturers with plants in Slovakia, announced on April 7 that it was suspending deliveries to the US. They account for about a quarter of the company's global sales.
The head of the National Bank of Slovakia, Peter Kazimierz, called this tariff policy "European-American Armageddon" on social media. At the same time, he warned that all this would lead to a slowdown in growth, cause tension in the labor market and increase prices.
Why is Slovakia so dependent on the automotive industry?
The importance of the automotive industry for the Slovak economy is due to the economic model developed by successive Slovak governments in the 1990s. Then Slovakia became a workshop for assembling cars for global concerns.
In addition to Jaguar Land Rover, Volkswagen, Stellantis and Kia also have production facilities in Slovakia. This has encouraged a large number of parts suppliers to also produce there. According to some forecasts, Trump's tariffs could threaten thousands of existing jobs in the sector, and economists from Erste Bank and KBC expect the impact to be in the order of at least 1.5 percent of GDP by 2028. This could be a devastating blow to Slovakia's already sluggish economy.
Prime Minister Fico Under Fire
Slovak populist Prime Minister Robert Fico, who (along with his Hungarian counterpart Viktor Orban) is one of Trump's biggest admirers among European leaders, traveled to Washington in February but failed to win concessions from the American president. Instead, he earned the scorn of the opposition, which is increasing political pressure on him.
"Robert Fico missed the mark. For months, he focused on issues that are not important for Slovakia, neglecting the most important thing - the automotive industry, the backbone of our economy," former Prime Minister Eduard Heger said after Fico's meeting with Elon Musk.
Economy Minister Denisa Sakova of the left-wing "Smer" party Fico has not lost hope that the tariffs can be postponed somehow. "If they are not canceled, we will have to cope somehow," she said. It was the rise in the cost of living after Russia's invasion of Ukraine that helped Fico return to power in late 2023. Slovakia's electorate remains highly vulnerable to economic conditions. The tariffs are therefore an unwelcome development for the ruling coalition, which has been in crisis for months due to internal disputes and mass protests by opponents sparked by Fico's pro-Russian stance and authoritarian policies. The three parties in the government - Smer, the center-left breakaway party Hlas and the left-wing party Hlas - have all agreed to a deal. and the far-right Slovak National Party (SNP) are already testing voters' confidence with austerity measures that are being imposed because of the empty state treasury.
Job losses?
It is precisely these voters who will bear the brunt of any job losses or income losses due to Trump's tariffs. "This threatens to deepen Slovakia's economic problems and could mean big problems for the government," political analyst Tomasz Koziak told DW. "The ruling parties are already losing support. This will accelerate this trend and cause further chaos in the coalition. Who knows how long it can survive," he added.
The government is therefore nervously looking for a way to shift the blame. Interior Minister and Hlas leader Matusz Šutaj Eštok accused Brussels of "moralizing" at the expense of "security and prosperity", which left the EU too weak to prevent a tariff disaster.
A change in the economic model is needed
Analysts suggest that the tariffs should also be used as an opportunity to move forward with the long-neglected change in Slovakia's economic model - an issue that no Slovak government has taken action on in the past three decades.
"All of Slovakia's leaders, and especially Fico, rejoiced and took credit when a new car manufacturer came to the country. "Long-standing warnings about the automotive sector's too high share of the economy have now come true," says Koziak.
Author: Tim Gosling