RIGA, Jan. 21 (Xinhua) -- If U.S. President Donald Trump follows through on his threat to impose new trade tariffs on eight European countries, it could mean slower export and economic growth for Latvia, according to Karlis Purgailis, chief economist at Latvia's Citadele Bank.
Trump announced that from February 1, European countries not supporting his plan to acquire Greenland would face a 10 percent tariff on all goods exported to the U.S. Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland would be directly affected.
In a press release published on Wednesday, Purgailis noted that these countries are significant trade and supply chain partners for Latvia. This means the indirect impact of the U.S. tariffs on them could result in slower growth of Latvian exports and the overall economy, fewer industrial orders, and sluggish labor market and wage growth.
In his analysis of the possible consequences, the economist outlined three scenarios: negative, neutral, and relatively positive. With Latvia's economy previously expected to grow by around 2 percent, the impact would vary: In a negative scenario, economic growth would be hit hardest, falling by about 1.5 percentage points and slowing to roughly 0.5 percent; under a moderate scenario, growth would decline by around 1.1 percentage points, resulting in approximately 0.9 percent growth for the year; while in a mild scenario, the slowdown would be limited to about 0.7 percentage points, leaving Latvia's economy expanding at around 1.3 percent.
Purgailis said that in any case, the new U.S. tariffs would be a negative blow to the Latvian economy, but that there are no grounds to expect a recession or a crisis.
Slower growth would inevitably mean slightly higher unemployment and more moderate wage growth, but it would not be a dramatic slump, he added. ■