The economic policies outlined by newly inaugurated U.S. President Donald Trump are expected to increase pressure on Europe, particularly in areas such as environmental regulations and trade policies. However, analysts suggest that Trump’s approach, while aggressive, leaves room for future negotiations with European partners.

According to economists interviewed, the most significant impact is anticipated in the realm of environmental policy, where the European Union loses a key ally in its Green Deal agenda. Analysts warn that this shift could compel European policymakers to reconsider their sustainability goals. Meanwhile, Trump’s support for increased energy production is likely to drive down global energy prices, benefiting consumers but challenging the EU’s green transition efforts.

Green Policies in Jeopardy as U.S. Shifts Focus

One of Trump’s key economic promises involves rolling back environmental regulations and cutting support for electromobility. “The EU has lost a crucial partner in its green initiatives. The question now is how long the European leadership can sustain green policies that, while beneficial for the environment, have been a drag on economic growth,” said Pavel Peterka, chief economist at XTB.

Vít Hradil, chief economist at Cyrrus, echoed these concerns, noting that Trump’s expected departure from environmental commitments could hurt Europe’s competitiveness. “The EU is likely to maintain strict green regulations, which could further widen the gap in economic growth compared to other regions,” he added.

Energy Prices Set to Fall with Increased U.S. Production

Trump’s emphasis on boosting domestic production, particularly in oil and gas, is expected to lower energy costs worldwide and curb inflation in the U.S. “Trump aims to increase energy exports globally to strengthen the U.S. economy,” said Peterka.

Radim Dohnal, an analyst at Capitalinked.com, noted that while an increase in U.S. production could put downward pressure on prices in Europe, the decline may be tempered by Trump’s plan to expand U.S. strategic reserves. “Energy prices may drop, but the effect could be limited by increased stockpiling,” Dohnal said.

Trade Policies: Tariffs as a Bargaining Tool

Another cornerstone of Trump’s economic strategy is a potential shift in trade policy, which could include the introduction of tariffs. Analysts believe that such tariffs could serve a dual purpose—generating revenue for the U.S. budget and acting as leverage in trade negotiations.

“Trump did not specify any tariffs during his inaugural speech, which suggests they may not be an immediate priority,” said Petr Bartoň, an analyst at Natland. He added that while broad tariffs could be imposed on Europe, they are more likely to be used as a negotiating tool rather than an outright policy. Bartoň also warned that tariffs typically result in higher costs for domestic consumers, stating, “Tariffs inevitably impact the citizens of the country that imposes them, as they directly increase prices.”

Inflation Control and Its Global Impact

Trump’s focus on inflation reduction could also have consequences beyond the U.S., particularly for the Czech Republic in its election year. “Trump identified rising energy prices and government deficit spending as key drivers of inflation, a stance that could influence political debates in the Czech Republic,” Bartoň explained. Czech political parties are expected to use this argument in their campaigns to highlight the impact of government fiscal policies.

Panama Canal Concerns and Potential Trade Disruptions

Trump’s announcement that he intends to assert greater U.S. control over the Panama Canal has raised concerns about potential disruptions to global trade. Analysts warn that such a move could lead to temporary inflationary pressures worldwide.

Technology Sector Prioritized Over Traditional Industries

In a notable departure from previous inaugurations, Trump’s inaugural event prominently featured representatives from major global technology companies rather than industrial leaders. Dohnal pointed out that this reflects a shift in priorities and presents an opportunity for Europe to strengthen its technological standing. “Europe stands a better chance of catching up with the U.S. in technology rather than in energy-intensive sectors,” he noted.

Source: CTK

Despite a below-average volume of commercial real estate deliveries in 2024, the Czech market remained active, largely driven by domestic capital. According to experts at Colliers, this trend is set to continue in 2025, with investor focus shifting towards the residential and retail sectors. Sustainability and ESG considerations are expected to play a crucial role in shaping the market, while challenges related to the ineffective digitalization of construction management could pose significant hurdles.

Czech Investors Seize Opportunities Amid Foreign Capital Retreat

Economic turbulence and property price adjustments across European markets have led to a retreat of international investors from the Czech market, redirecting their focus elsewhere. This shift has created a unique window for Czech investors, who dominated the investment market in 2024 and expanded their presence across Central and Eastern Europe. Experts predict that in 2025, domestic investors will continue to capitalize on the weak presence of foreign capital, acquiring prime assets entering the market. Among the most sought-after properties will be shopping centers and retail assets, as well as build-to-rent residential projects, predominantly secured through forward purchases.

Residential Prices Expected to Rise Further

Rising demand for housing across the Czech Republic and the broader CEE region has fueled activity in the residential property market. Colliers anticipates that this trend will lead to further price increases, particularly in high-quality new developments. “With no significant improvements in zoning, permitting, or financing to stimulate higher construction volumes, the ongoing price growth comes as no surprise,” said Josef Stanko, Director of Market Research at Colliers. He added that private rental sector (PRS) projects and serviced rental housing will gain further traction, as evidenced by increasing investor interest in this segment.

Retail Sector Poised for Expansion

Following a downturn in 2023, retail sales in the Czech Republic rebounded strongly in 2024, revitalizing the retail real estate sector. Rising tourism and consumer confidence have spurred the development of new projects and the refurbishment of existing shopping centers and retail parks. Investor interest has also grown, leading to several significant transactions in the past year.

Leasing activity remains robust, with retailers eager to fill vacancies left from the previous economic slowdown. “In 2025, we expect expansion to be primarily driven by discount retailers and mass-market chains, targeting previously untapped locations,” said Stanko. Additionally, major brands are likely to test the market with temporary pop-up stores. However, the market for large shopping centers is expected to remain stagnant, given the already high saturation levels in Prague and other major cities.

Office Market to See More Renegotiations Amid Space Shortages

The Czech office market will continue to experience high levels of lease renegotiations in 2025, as developers face persistent challenges. Delays due to financing issues and a shift in focus toward residential projects have hindered new office developments. Despite this, some projects have progressed through speculative builds or forward acquisitions, with over 160,000 square meters of office space currently under construction in Prague.

However, demand for new office space remains high, and options are limited in key locations, with vacancy rates as low as 3%. “Companies seeking office space in prime locations may postpone their projects until suitable options become available,” Stanko noted. This trend is expected to result in a higher volume of renegotiations compared to new leases.

Industrial Real Estate Faces Continued Challenges

The Czech industrial real estate sector continues to struggle against competition from neighboring countries, which offer more attractive conditions such as lower rents, better incentives, and a more favorable regulatory environment. These factors have led some companies to reconsider their expansion plans or move their operations abroad.

“Industrial real estate demand is expected to face a challenging first half of 2025, with improvement likely in the second half,” said Stanko. However, he cautioned that total transaction volumes will likely be lower than in 2024, marking the fourth consecutive year of market slowdown. Rental rates are expected to see only slight declines, but landlords may offer more attractive incentives such as rent-free periods, flexible lease terms, and additional benefits to attract tenants.

Despite these efforts, the Czech industrial sector remains at a disadvantage compared to neighboring countries, and competition is expected to remain fierce in the coming year.

Source: Colliers Czech Republic