CEE MARKETS-Stocks slump as fresh US tariffs kick off

WARSAW, March 4 (Reuters) - Central European stock markets slipped on Tuesday, caught in a global sell-off, after U.S. tariffs on its top three trading partners - Canada, Mexico and China - came into effect.

U.S. President Donald Trump's fresh 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%.

European shares also dropped on concerns that similar levies could be imposed on the European Union.

"Geopolitics will remain a primary factor for financial markets. An echo of Friday's breakdown in Ukraine-US talks (on mineral extraction) is Trump's decision to suspend military aid to Kiev. Today, tariffs on goods imported to the US from China, Canada and Mexico also come into effect," Bank Millennium analysts wrote in a note.

"It is possible that we will see further decisions by Trump's administration, this time aimed at the European Union."

Central Europe's economies are highly dependent on exports to Western European Union countries, especially Germany.

As of 1010 GMT, Warsaw's .WIG20 blue-chip index, which had been trading near 14-year highs, dropped 2.8% to a three-week low, leading losses in the region.

Prague .PX and Budapest .BUX indexes, both retreated from recent record highs and slipped 1.6% and 1.5%, respectively.

On the currency front, Hungary's forint EURHUF= traded 0.4% higher against the euro at 398.50, after hitting 398.05, its strongest level since October 2024, in early trading.

"The forint is firming as it got on the train of the weakening dollar and no more rate cuts, there is nothing else really affecting it. There is a very little activity on the market actually," a Budapest-based trader said.

Hungary's central bank left its base rate steady last week, citing the risk that inflation could be higher this year than previously forecast.

"On the issue of global news, there is a wait-and-see mode, a back-and-forth on tariffs has started and markets need to see where all that will lead in the long term," the trader added.

The zloty edged 0.2% higher to 4.1580 per euro, after increased volatility since Friday.

"We expect that despite the continued nervousness, the valuation of the Polish currency against the euro will oscillate around 4.17, waiting for new impulses ... In our opinion, the zloty will stay jittery and the direction of changes will depend on the incoming information on broadly understood geopolitics," Bank Millennium analysts wrote.

The Czech crown EURCZK= traded 0.1% lower at 25.0640 per euro, on the weaker side of the key 25 level.

"The security situation in Europe is rather deteriorating in the unclear geopolitical terrain and the reality is the start of the Trump 2.0 trade wars - none of this plays much in the crown's favor," Czech bank CSOB said in a note.

Trump paused military aid to Ukraine overnight following his clash with Ukrainian President Volodymyr Zelenskiy last week, a White House official said, deepening the fissure that has opened between the one-time allies.