Anna Breman: How trade barriers affect the Swedish economy and inflation

Speech by Ms Anna Breman, First Deputy Governor of the Sveriges Riksbank, at the Norrbotten Chamber of Commerce, Kiruna, 20 February 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you for inviting me to speak here in Kiruna! We have had a turbulent start to the year 2025. It is likely that we will continue to receive conflicting statements from the United States on economic policy, not least with regard to their trade policy. This contributes to financial market volatility and general uncertainty about the outlook for economic activity and inflation.

Kiruna is closely linked to Swedish exports through the mining industry. Like other Swedish industries, the mining industry may be adversely affected by the developments we are now seeing abroad. I would therefore like to focus my speech today on how the Swedish economy and inflation are affected by the risk of escalating trade barriers, and what we in Sweden can do to counteract the negative effects.

Trade barriers are particularly negative for an export-dependent country like Sweden. However, their impact will depend on the scope of the tariffs, which countries are affected and how these countries respond with various countermeasures.

If the United States introduce extensive tariffs and other trade barriers in, and the EU responds with countermeasures, Swedish growth would be dampened, while the effect on inflation in Sweden is uncertain. Trade barriers tend to lead to higher inflation. But, on the other hand, poorer economic performance can lead to lower demand, which leads to lower inflation. I will discuss this later in this speech.