In the current context of international trade relations, the measures and countermeasures adopted by the United States have become subjects of intense debate and negotiation, both with major economies like the EU and China, as well as with its direct neighbors, Canada and Mexico. These actions seem to be part of a complex game of obtaining concessions and long-term advantages, with the U.S. seeking to strengthen its position in the global market. A lot of ink has been spilled on this subject in the last two months, so I have set out to take a closer look at what this difficult context brings to the Romanian economy. And the impact is more complex than it appears at first glance.
Romania-U.S. – Trade in Goods
It is essential to mention that, regarding Romania’s direct trade with the United States, it is not significant: both imports and exports of goods to the U.S. are limited.
At the same time, Romania’s intra-EU27 trade value in 2024 was 66.7 billion euros in exports and 90.9 billion euros in imports, representing 72% of total exports and 72.1% of total imports.
Thus, according to INS data, Romania’s exports to the U.S. amounted to 2.11 billion euros, while imports were 1.2 billion euros, resulting in a trade surplus of over 900 million euros. The U.S. is Romania’s second-largest non-EU trading partner, after the United Kingdom, but only the 12th overall trading partner. The share of exports to the U.S. in Romania’s trade balance is 2.5%, while the share in total imports is 1% (aggregated data for the first 11 months of 2024). However, EU member states are most exposed to these commercial tensions between Europe and the U.S. following the installation of the new U.S. administration at the White House. Therefore, harmful influences could affect, and not necessarily in a marginal way, the Romanian economy, the prices of goods brought from or through EU countries, and very likely even the evolution of GDP and inflation this year.
Tax Aspects and the BEPS 2.0 Directive – Is Trade in Services at Risk?
Another important aspect of this trade war – and much less visible to the general public – is related to BEPS 2.0, an international agreement aiming at the taxation of corporate profits. Almost 130 countries have committed to imposing a minimum tax rate of 15%. However, the U.S. decided to withdraw from this agreement (even though it initiated it a few years ago!), citing a disadvantage for American companies. This decision has caused diplomatic and economic tensions between the U.S. and the European Union. In the event that the BEPS 2.0 directive is not scrapped, the U.S. has indicated that it might impose punitive measures, including massive withholding taxes on income from services provided by European companies to American clients. These revenues, which are now exempt in most cases, could end up being taxed at 30%, which could significantly affect Romania’s IT sector, for example, which relies heavily on the U.S. market. A sudden tax increase could undermine Romania’s international competitiveness and discourage investment in this sector. Several operations, such as call centers, could become unprofitable.
In conclusion, while the immediate impact of the U.S.-Europe trade measures on Romania may seem limited, the indirect effects could be massive. Rising prices and possible punitive measures from the U.S. could affect the Romanian economy, especially sectors closely connected to the American market. It is crucial for Romania to monitor these developments and prepare for potential changes in the international trade landscape.
Just as the political community, the business environment must also ask itself: What is Plan B?
by Alex Milcev, Partner, Leader of the Tax and Legal Department, EY Romania