U.S. tariffs projected to shrink Finland's GDP by up to 1.6%: Etla

Tariff hikes proposed by the United States could significantly impact Finland's economy, potentially reducing its gross domestic product (GDP) by as much as 1.6 percent, said a Finnish research institute warned on Monday, reported Xinhua.

In its latest report, the Research Institute of the Finnish Economy (Etla) said Finland's GDP could decline by between 0.5 percent and 1.6 percent if all proposed U.S. tariffs are implemented.

Exports to the United States accounted for 11 percent of Finland's total exports in 2024. Nearly 60 percent of these were goods - particularly vulnerable to higher tariffs - including machinery and equipment, pharmaceuticals, measuring instruments, and pulp and paper.

Washington has threatened to raise tariffs by up to 25 percent on all imports from the European Union (EU). A 25-percent tariff on steel and aluminum has been in effect since March 12. In retaliation, the EU announced plans to impose counter-tariffs worth 26 billion euros (about 28 billion U.S. dollars) starting in April.

"It is already clear that the effects of the tariffs President Trump has mentioned on several occasions would hit the Finnish economy hard. If Finland's indirect exports to the U.S. are taken into account, the impact could be even greater," Jyrki Ali-Yrkkö, Etla's research director, said.

He noted that the uncertainty surrounding a potential trade war is also dampening investment sentiment.

Etla's report added that possible EU countermeasures could further slow GDP growth and raise inflation both in the United States and across the bloc. It recommended that the EU consider targeting U.S. service exports in its response, as the United States exports more services than goods to the EU.

The institute based its projections on value-added losses linked to a decline in Finland's gross exports. It said further analysis is needed to fully assess the impact on indirect exports.