Latvian Export Faces Headwinds: A Gaze at Shifting Global Trade Dynamics
Latvia’s export sector experienced a modest uptick in December, rising 2.7% year-on-year, according to data from the Central Statistical Bureau (CSP). However, this compact gain couldn’t fully offset a 0.3% contraction in the fourth quarter of 2025, signaling emerging challenges in the global trade landscape.
Sectoral Performance: A Mixed Bag
The final quarter of the year saw a decline in exports of grains, wood and wood products, and chemical industry products. Conversely, exports of mineral products, electrical equipment, machinery, food products, and animal products increased. This divergence highlights a shifting pattern in Latvia’s export portfolio.
Wood Product Exports Feel the Pinch
Wood and wood product exports, traditionally a significant 15% of Latvia’s total export value, experienced a substantial decrease of approximately €50 million, or 6%, in the fourth quarter. This decline was particularly pronounced in exports to the Nordic countries, specifically Sweden (-€30 million, -35%) and Finland (-€18 million, -44%), where sluggish housing markets continue to weigh on demand.
Exports to the United States also suffered, falling by €22 million (-59%), a direct consequence of the 10% tariff imposed on US-bound wood imports from mid-October. Experts anticipate that a rapid recovery in wood exports is unlikely in the near term.
US Tariffs Broaden the Impact
The impact extends beyond wood products. The 15% tariffs introduced by the US in August on a range of European Union goods are also affecting Latvian exports of lasers, optical devices, mixed chemical products, and glass products. Exports to the US fell nearly 27% in the fourth quarter, though it’s important to note that the US currently accounts for only 2.5% of Latvia’s total export value.
The indirect effects of these tariffs – potentially slower growth in the crucial European market and increased competition – are expected to become more apparent over time.
Manufacturing Output Slows, But Outlook Remains Cautiously Optimistic
Processing industry output, which enjoyed robust growth throughout much of 2025, experienced a marked slowdown at the end of the year. While this deceleration was anticipated, its speed raised some concerns. However, data compiled by the European Commission indicates that export orders in the processing industry remain around their long-term average, a positive sign.
This suggests that, at least for now, global uncertainty, recent shifts in US trade policy, and anticipated slower global trade growth haven’t significantly altered Latvian manufacturers’ expectations regarding external demand.
Future Opportunities: New Trade Agreements
New EU trade agreements with South American countries and India could potentially open up new export opportunities for Latvian producers. However, realizing these benefits will require time, even if the agreements are swiftly ratified.
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FAQ
- What is the current state of Latvia’s export sector? Latvia’s export sector saw a small increase in December, but experienced a contraction in the fourth quarter of 2025.
- Which sectors are facing challenges? Wood product exports are significantly down, particularly to Nordic countries and the US, due to slow housing markets and tariffs.
- What is the impact of US tariffs? US tariffs are impacting exports of wood products, lasers, optical devices, and chemical products.
- Are there any potential opportunities for growth? New EU trade agreements with South American countries and India could offer future export opportunities.
