The new tariff policy of the United States may weaken Bulgarian firms' competitive edge and lead to job losses, economists predict.
Trade between Bulgaria and the U.S. has maintained a modest but stable share in recent years, according to data from the Ministry of Economy and Industry. Bulgarian exports to the U.S. account for approximately 2.5% of the country’s total exports, while imports from the U.S. make up 1.2%.
Separately, however, many Bulgarian companies are subcontractors to European companies that export to the United States. One of the sectors expected to be affected is the automotive industry. The Ministry of the Economy is awaiting the position of Brussels.
A small number of Bulgarian companies export directly to the United States. However, a large number of companies are indirectly linked to overseas exports.
"Ultimately, Bulgaria is not the primary target of these tariffs. The goal is to penalize manufacturers in France, Italy, and Germany. However, since many of our businesses are linked to these major economies, they are likely to suffer as well," said Adrian Nikolov, an economist at the Institute for Market Economics (IME).
The analyst adds that today's situation is rather unpredictable.
"Bulgarian companies will face greater difficulties exporting their products, which could limit their expansion plans and even force them to lay off workers."
Around 11% of Bulgaria's gross domestic product is generated by companies working in the automotive industry. Some of them export to the United States and others are suppliers to European companies. The introduction of higher tariffs for the industry is no surprise for them.
"The automotive industry, not only in this country, but in the whole world, has been preparing for this scenario for years—since 2017, in fact. These tariff policies were signaled during President Trump’s first term. As a result, many companies have engaged in what I call ‘industrial hedging.’ Most major European automakers now have production facilities in the U.S.," explained Lyubomir Stanislavov, CEO of the Automotive Cluster Bulgaria.
The Bulgarian car business is also doing well.
"Currently, order volumes are at record highs. The question is whether this trend will continue until the end of the year," Stanislavov noted.
The cluster admits a small but still probable scenario.
"Sometimes, the opposite effect occurs. When manufacturers need to cut costs or reduce the number of suppliers, they look for those who can operate more efficiently. In many cases, these are Bulgarian companies. So, in some instances, such crises actually lead to more orders for Bulgarian firms," he explained.
However, Stanislavov sees a problem in the possible introduction of reciprocal measures by the European Union.
"For example, many high-end SUVs from prestigious German brands are manufactured in the U.S. and then imported back into Europe. If the EU imposes reciprocal tariffs, it could hit European manufacturers hard," Stanislavov warned.
Economists believe Brussels will take a cautious approach before responding with similar trade measures.
"The big risk is if the European Commission decides to impose tariffs on energy imports from the U.S. A significant portion of Europe’s current imports from the U.S. consist of natural gas and related products. Such tariffs would drive up production costs across the continent. Hopefully, the EU will remember its role as a stronghold of free trade and opt for tariff reductions instead," said Adrian Nikolov.
According to data from the Ministry of Economy and Industry, Bulgarian exports to the U.S. have been declining over the past year. On average, trade in goods is down by 8%, with exports dropping by 2% and imports of American products falling by over 19%.
A representative of the Ministry of Economy and Industry commented:
"Countermeasures against U.S. trade policies are being coordinated at the EU level, as all member states are affected by this deterioration in bilateral relations. The European Commission is expected to propose retaliatory measures against the U.S. in the near future."
For years, Bulgaria has not appointed a trade representative in Washington. The Ministry of Economy anticipates three primary consequences for businesses: reduced competitiveness, disruptions in supply chains, and impacts on Bulgarian companies engaged in exports.
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