Hungary's heavily export-oriented, manufacturing-driven economy is among the more vulnerable EU member states in the transatlantic trade war, according to analysts. Viktor Orban, a staunch supporter of Donald Trump, has repeatedly referred to the period ahead as the new golden age in bilateral ties, but Washington's sweeping tariffs could hurt Hungary's already worsening economic prospects.

The first reaction by Hungary's government was to put the blame on the European Commission instead of Washington. Foreign Minister Peter Szijjarto accused Brussels of failing to secure meaningful dialogue with the Trump administration. "This strategic miscalculation will be paid for by European industry," he added. Viktor Orban, hosting Israeli PM Benjamin Netanyahu did not comment on the US tariffs.

Analysts warned that with a heavy reliance on automotive manufacturing, much of it tied to German brands exporting to the US, Hungary could face factory slowdowns, investment delays and job losses if demand for EU-assembled vehicles declines.

The tariffs also threaten to amplify existing headwinds in the Hungarian economy, including stagnant household consumption and a cooling industrial sector, putting further strain on Viktor Orban's economic narrative ahead of a politically sensitive period.

David Nemeth, chief economist at K&H Bank, estimated the direct hit to Hungary's GDP from the car sector alone could reach 0.2-0.25% in 2025. Tariffs are likely to dampen demand for European products broadly, weighing on industrial output in Hungary, where automotive manufacturing remains a cornerstone of the economy, he added.

Fund manager Granit Alapkezelő said tariffs could potentially reduce output by 0.1-0.2pp this year. The government has recently slashed its growth target from 3.4% to 2.5%, which is still seen by many as overly bullish. The National Bank downgraded its GDP growth forecast for 2025 to 1.9-2.9% in late March from 2.6-3.6% three months earlier.

"The market won't disappear, but it will shrink considerably," he warned, adding that a failure to reorient exports could lead to a drop in output, income losses and layoffs, commented former governor of Hungary's central bank, Peter Akos Bod.

In a fresh report, the Vienna Institute for International Economic Studies (WiiW) warned Hungary's export-driven economy is expected to suffer both short- and long-term consequences of the tariffs and Budapest stands to be one of the biggest losers among EU countries.

The tariffs, effective from April, target vehicles and auto parts under HS code 87, which account for nearly 10% of global trade. The EU, the world's largest auto exporter, is expected to see a $8bn decline in exports to the US, with Hungary among the most exposed.

The study estimates that in the short term, Hungary's auto exports could shrink by 0.37%, while long-term effects could bring a 0.46% contraction, second only to Slovakia within the EU.

Hungary's focus on battery production makes it particularly vulnerable to tariffs, local analysts said.

While the direct effects of the tariffs on Hungary's economy may be limited, the overall European economic slowdown, especially in Germany, could have a more substantial impact on Hungary's export-oriented manufacturing sector. Hungary's direct exports to the US accounted for 4.1% of its total exports, roughly €6bn in 2024.

In an analysis by ING, trade instability in Central and Eastern Europe is linked to the region's historically export-driven growth model. Slovakia, Hungary and the Czech Republic are among the countries most exposed to trade shocks. The numbers do not seem alarming at first – unless a prolonged trade war ensues, it said. Sector-wise, Hungary's focus on battery production makes it particularly vulnerable to tariffs. ING's analysis also highlights the need to monitor the region's metal and pharmaceutical industries.

However, the key message of ING's report is that the region may be more resilient than initially assumed. New EU-led trade agreements could be leveraged, and the region could attract American investments, especially in strengthening NATO's eastern flank.

There is also potential for negotiating lower tariffs on specific sectors, particularly in defence and possibly the nuclear industry. Some countries, Hungary in particular, continue to benefit from Asian, especially Chinese, foreign direct investments. Moreover, the region is supported by strong domestic demand and EU funds, except Hungary, which is seeking to secure new financing sources to replace suspended EU funds. 

According to a report by Radio Free Europe, denied by the Economy Ministry, the government has already made the decision to take out a €10bn loan before the election to kickstart the economy and to make up for money frozen by Brussels. The possible sources include China, the United States, Japan, Qatar, or even the European Investment Bank (EIB).

The relatively low cost of production in Hungary, driven by lower wages and less stringent regulations compared to Germany, could encourage companies to increase capacity in Hungary, thus helping to offset some of the negative effects, other economists said.

This was the main message by Hungary's National Economy Minister, who argued that the country's strong position in the automotive sector could help it weather any fallout of the impending trade war.

Marton Nagy said the impact of the US measures will hinge heavily on how major German carmakers respond. If they accelerate investments in US-based production facilities, he argued, they may be able to sidestep the proposed duties entirely, mitigating the broader impact.

The minister pointed to recent expansions by global automakers as proof of Hungary's growing strategic importance. Mercedes-Benz is set to begin production of several models in Kecskemet, while BMW's new plant in Debrecen will soon roll out its next-generation Neue Klasse vehicles.

Hungary's positioning within the auto supply chain could allow it to benefit from a broader shift in production from Western Europe to Central and Eastern Europe. This, he said, could spur further capacity growth and job creation domestically.