Billions in losses feared: Ukraine loses EU customs exemption overnight

To help Ukraine financially, the EU is waiving import tariffs for the attacked country. Because there is no successor solution yet, the regulation is now expiring. This could cost Kyiv billions. A German EU politician believes this is "inappropriate consideration" for Poland.

The European Union has allowed three years of trade benefits for Ukraine to expire, which it had supported under Russian attack. According to the EU Commission, transitional rules came into force at midnight German time. They will apply until negotiations on a new trade agreement are concluded.

According to Ukrainian agricultural organizations, preliminary estimates indicate that the changes could result in billions in losses for Ukraine. They fear a loss of up to 3.3 billion euros in foreign exchange earnings and a decline in economic output of around 2.5 percent this year.

When asked whether the EU should now support Ukraine with more financial aid, a spokesperson for the EU Commission recently said it was too early to answer that question. "These are precisely the questions we need to get to the bottom of in our discussions with our Ukrainian partners," the spokesperson said.

Which reliefs will be eliminated?

The EU exempted Ukrainian goods from import tariffs in February 2022, around 100 days after the start of the Russian war of aggression. This was intended to strengthen the country's economy, as the measures focus on agricultural products. The Eastern European country has a comparatively large agricultural sector, which accounted for more than seven percent of economic output in 2023. By comparison, in Germany, it is less than one percent.

Last year, the trade facilitation measures were extended, but at the same time, stricter requirements were introduced for certain food imports into the EU. These included poultry, eggs, sugar, oats, corn, groats, and honey.

Why are the relief measures controversial?

Supporting Ukrainians through tariff exemptions was a thorn in the side of many European farmers, especially in neighboring eastern countries such as Poland and Hungary. They complained of disproportionate competition from cheap agricultural imports from Ukraine. Calls for stricter tariff regulations also came from France. According to EU diplomatic sources, national interests in the agricultural sector also played a role in the current debate on the expiration of trade facilitation.

The chairman of the Trade Committee in the EU Parliament, Bernd Lange, described it as "unspeakable" that it had not been possible to find a consensual solution before the expiration of the trade facilitation measures. He viewed the removal of the tariff exemption as an inappropriate consideration of sensitivities in Poland. There, the right-wing conservative Eurosceptic Karol Nawrocki won the presidential election on Sunday by a narrow margin. Nawrocki also campaigned on anti-European slogans and intends to make life difficult for the ruling center-left coalition of pro-European Donald Tusk.

What rules apply now?

According to the EU Commission, the tariff quotas of an agreement in place since 2016 have been in effect again since midnight. With almost half of the year already over, seven-twelfths of the annual quantities from the old trade agreement will be available until the end of 2025. The Commission stated that it is working rapidly toward a new agreement, including addressing the concerns raised by European farmers and some EU member states.

EU and Ukraine negotiators are in talks about a permanent new agreement. Pressure on Ukraine to reach a result as quickly as possible has increased with the expiration of the current easing measures. How long the talks will last is still unclear. Trade policy expert Lange hopes to "reach a result quickly now."