Copyright kyivpost
Although Ukraine stands to lose $1.14 billion in annual exports to the EU following the end of its entirely duty-free regime, the overall hit could shrink to $253 million as exporters pivot to new markets. Three years ago, the EU opened the tariff-free doors for Ukraine’s exports. When Russia launched its full-scale invasion of Ukraine in February 2022, Russian mines in the Black Sea blocked Ukraine’s cargo exports, and the EU stepped in. The European Union cancelled tariff rate quotas (TRQs) for 36 product groups from Ukraine, mainly agricultural products – the tool of TRQs means tariffs are reimposed only when Ukraine’s export volumes exceed a certain level. The EU’s welcoming move prompted Ukraine to increase its agricultural exports by almost 60%. But, the joy was short-lived – the EU reinstated the TRQs in response to demands from Poland, Romania, and Hungary. At first, Ukraine expected a sharp decline in export revenues, so desperately needed for a war-torn economy. The country’s central bank, the National Bank of Ukraine (NBU) first estimated that removing the EU trade preferences would cost Ukraine $700 million in revenue by the end of 2025. But the updated figures from independent researchers seem to be much more optimistic, reaching merely $253 million, researchers Veronika Movchan from the Institute for Economic Research and Policy Consulting (IER) and Dr. Ricardo Giucci from the German Economic Team estimated. The overall decline in exports will be much smaller than it could have been thanks to the redirection of freed export volumes to markets outside the EU, the research says. And it will create more certainty for the business, as the EU and Ukraine negotiated a long-term policy instead of short-term political preferences. What’s the importance of these changes? What factors led to such a sharp reduction in estimated losses – a rare piece of good news for Ukraine’s wartime economy? How the EU ended temporary duty-free access for Ukrainian exports The Autonomous Trade Measures (ATM) expired on June 5, 2025. The ATM had been negotiated with the EU following Russia’s full-scale invasion, as Russia’s navy was blockading Ukraine’s Black Sea ports. The ATM removed TRQs on 36 categories of Ukrainian goods, but this had led to protests by Ukraine’s European neighbors, who faced new competition with cheap Ukrainian imports. Moving forward, trade between Ukraine and the EU will be regulated once again by the Deep and Comprehensive Free Trade Area (DCFTA), the key part of the Association Agreement, signed in 2014 and came into effect in 2017. The European Union and Ukraine concluded negotiations on an updated trade agreement on June 30. The European Commission outlined three key pillars within the negotiations with Ukraine: a level-playing field, a robust safeguard clause, and enhanced trade flows. This agreement – announced by Ukraine’s Deputy Prime Minister for European and Euro-Atlantic Integration, Taras Kachka, on Oct. 14 in his Facebook post – removed part of the tariffs and expanded export quotas for agricultural products entering the EU market. But details remain scarce. “The Association Committee in Trade Configuration adopted Decision 3/2025 on Oct. 14, which will take effect in 15 days, on Oct. 29. Ukrainian exporters will be able to benefit from the new trade regime this year. The decision is bilateral and permanent, with the next review aimed at further increasing market access scheduled for 2028,” he wrote. The European Union’s introduction of temporary Autonomous Trade Measures (ATMs) provided largely duty-free access for Ukrainian exports to the EU market from June 2022 to June 2025. As the EU and Ukraine returned to the DCFTA, Ukraine’s exports once again started to be regulated with the TRQs. According to Movchan and Giucci, the new TRQs, set to take effect at the end of October 2025, will partially compensate for these losses but not entirely. Although the new TRQs offer a considerable expansion compared to the old TRQs, for several products, they stay well below actual Ukrainian exports in 2024 under ATMs. But, the overall decline in exports will be much smaller than it could have been thanks to the redirection of freed export volumes to markets outside the EU. Ukraine’s export losses after EU pull-back concentrated in wheat and sugar Movchan and Giucci estimate that Ukraine’s exports to the EU will decrease by $1.14 billion annually compared to 2024 levels. The main reason for these losses is the sharp expected decline in wheat exports to the EU. According to calculations, supplies will fall by $894 million annually, accounting for four-fifths of the total reduction in exports to the EU. Exports of sugar, barley, poultry, eggs, apple juice, and honey will also suffer losses. Compared with the old tariff quotas that were in effect before June 2022 and reinstated in June 2025, the researchers deem the current changes a “significant liberalization of trade.” Out of 36 quotas, four tariff quotas have been completely abolished, and another 26 expanded – the most significant increases are for honey, sugar, barley groats, and bran. Will it help the numbers? Yes. Movchan and Giucci estimated that with all new agreements, Ukraine could potentially expand duty-free exports by $630 million annually, or 35% compared to previous conditions. And save up to $165 million in import duties. “The reason for the export decline is the cancellation of the autonomous trade measures that had been in place since mid-2022. The new tariff quotas being introduced now are unfortunately not large enough to offset this cancellation,” the study quotes Movchan, the co-author and an economist at the IER. However, first, the new quotas are permanent and will influence long-term investment decisions, unlike the short-term ATMs. And second, the export impact will be much smaller because Ukrainian exporters would redirect part of their supplies to other markets, she added. Market reorientation cuts total export decline to $253 million But what helps Ukraine more is the reorientation to non-European markets. The estimated annual reduction in exports to the EU of $1.14 billion would be partially compensated by the reorientation of $891 million worth of exports to other destinations. As a result, the estimated annual decrease in Ukraine’s total exports would be more moderate – at $253 million, Movchan and Giucci estimated. The losses are driven by: • Higher transportation costs, mainly for shipping wheat outside the EU. • Lower prices in alternative markets for products such as poultry, sugar, and apple juice. Overall, the total decline equals about 0.6% of Ukraine’s total export volume in 2024, Movchan and Giucci estimated. New tariff quotas to shape long-term investment decisions Unlike the short-term Autonomous Trade Measures (ATMs), the new tariff-rate quotas (TRQs) are permanent, providing a stable framework for Ukrainian exporters. The ATMs relied on the political will of the EU and the second the consensus was lost, the stable export flow from Ukraine was jeopardized. Since 2022, the EU has deliberately increased demand for Ukrainian agricultural products, resulting in 60% of Ukraine’s agricultural exports being directed to Europe. “Ukraine was effectively pushed into a dominant position as an agricultural exporter – because the world needed food security. We transported grain through Europe not just because Europe needed it, but because it was an act of solidarity and the need to transit,” Movchan previously told Kyiv Post in an article: “EU Pulls Back: What the End of Duty-Free Trade Means for Ukraine.” Ukraine’s sudden agricultural leadership in the EU did not sit well with Ukraine’s neighbors, who began physically blocking shipments – shutting down land borders with Ukraine at a time when foreign currency earnings were vital for funding the country’s defense efforts. In the first half of 2024, Polish farmers blocked roads to the Ukrainian border and forcibly opened two Ukrainian railcars at the Medyka crossing, causing a grain spill, DW reported. The farmers considered Ukraine the cause of decreased prices for grain, by supposedly “flooding” the EU market. Ukraine’s agricultural industry is different from the EU’s: 93% of EU farms are small family farms averaging 11 hectares, EU Parliament research says, while Ukraine has many medium-sized (200 to 2,000 hectares) and several very large (compared to Europe’s) agricultural enterprises. Europe did not expect Ukraine’s industry to be that large in size. But now, the politically anchored ATMs are replaced with long-term agreements that create more stability for businesses. Movchan and Giucci wrote the permanence of the new TRQs will influence not only immediate export volumes but also long-term investment strategies in production, logistics, and market expansion. While the study does not quantify the full scale of these long-term effects, researchers note that the new regime creates predictability and a stronger foundation for business planning.
