Trade, tariffs, and turmoil: Trump’s second term unleashes global uncertainty

You could be managing a country, a company, or your own household – one of the biggest challenges in leadership positions is making decisions when you're uncertain of what is to come. 

Parents panic if they don’t know how many people they need to cook for. Managers would think twice before taking on a new project if they’re hearing rumours about company layoffs. Prime ministers hesitate to implement sweeping reforms if the economic outlook is unstable or if geopolitical tensions are on the rise. In any leadership role, uncertainty breeds hesitation. 

Politics has become all the more uncertain. It has been five years since COVID-19 forced countries into lockdowns and three years since war broke out on Europe’s border. Energy prices soared; general inflation skyrocketed. Now, the United States has a new but familiar president, Donald Trump, who is fresh into his second term at the White House, and he’s waging an economic war of his own. 

Trump has been in office for just over 50 days, but he’s come back swinging for his second term as president. In his home country, he set up the Department of Government Efficiency (DOGE), renamed the Gulf of Mexico to the Gulf of America, and banned transgender women from competing in women’s sports teams. 

Abroad, his actions have been equally erratic. He halted all aid to Ukraine, only to reinstate it after the war-torn country agreed, in principle, to a 30-day ceasefire. His government slapped tariffs on goods from Mexico and Canada but then granted a one-month tariff exemption on goods that trade under the US-Mexico-Canada Agreement. 

Now, his target is also set on the European Union (EU). Last month, Trump made it clear that he plans to impose tariffs on goods made in the EU. When he imposed tariffs on all aluminium and steel imports, the EU decided it would retaliate in two phases: first by reimposing tariffs that were already in place during Trump’s first term, and secondly by adding more levies on top of this, to the tune of around €18 billion. 

The EU is fighting the trade war, and companies are feeling the effects. MaltaToday spoke with two leaders in the business community, both familiar with manufacturing and supply chain logistics, to understand how companies are coping in these uncertain times. 

Disrupting the status quo 

Few people understand business operations the way Marisa Xuereb does. An economist by profession, she has held directorships at some of Malta’s biggest companies. She spent 10 years on the council of the Malta Chamber of Commerce and served as its president between 2021 and 2023. 

To Xuereb, it’s clear that Trump is in a race to grab as much of the global supply of critical minerals as he can. Ultimately, his war is against China. According to the International Energy Agency, China is the largest copper refining country, with around 40% of the market share. When it comes to refining operations, China’s share is around 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements. 

Economist Marisa Xuereb

“These minerals are the new oil because they are key to both the green and the digital transition,” she said. “This is why Trump is holding back on the green transition: At this point, China stands to benefit most from it. A typical electric vehicle requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a gas-fired plant. The concern regarding critical minerals was already there during his first term eight years ago, but it has now become an obsession that drives everything else he is doing on the global scene, including the imposition of trade tariffs on neighbouring Canada and his manoeuvring on the war in Ukraine, both mineral-rich territories.” 

What is worrying boardrooms everywhere, according to Xuereb, is that Trump will do whatever he feels is necessary to grab critical minerals. This became clear when Trump himself acknowledged that trade tariffs would hurt Americans in the immediate term and did not exclude a recession. “Trump is clearly challenging the status quo in the most disruptive of ways. The end justifies the means,” she said. 

The real victims of the trade war 

Ruben Cuschieri, managing director of R3Vox Ltd, has a clear view of how these tariffs will affect European and American companies—not only because of the company’s manufacturing experience, but also because it is the sister company to R2Sonic, an American company founded in 2005. He is also a member of the Malta Chamber of Commerce, occupying the role of chairperson in the chamber’s manufacturing economic group. 

R3Vox Ltd managing director Ruben Cuschieri

“As with any other war, the victims of trade wars are not the ones starting them or instigating them, but other parties who have less say in the matter,” he said. “This volatile situation has left many businesses and investors guessing at how these tariffs and retaliatory ones will impact their competitiveness, their customer base, and their supply chain.” 

The situation was uncertain enough before Trump became the US president, Cuschieri said, with wars in Ukraine and Gaza and threats between China and Taiwan. “We are already seeing certain companies deciding to shut down their operations, which in turn will impact the supply chain, leaving companies scrambling to find alternatives to ensure that their operations would be able to continue, albeit at potentially higher operational costs,” he added. 

Bracing for impact 

Cuschieri said many businesses have been on high alert for several years, potentially even before the COVID-19 pandemic. This forced companies to nearshore their operations (outsourcing work to a nearby country) or even re-shore to solve vulnerabilities.  

“It is a general concern that EU companies, especially in the manufacturing sector, will not be able to react in a faster manner than they have been doing in the last few years,” he said. 

Cuschieri added that, in the short term, tariffs are bound to have a direct impact on the cost of imported goods. “For a country like Malta, which is heavily reliant on imports, this is expected to have a significant impact on the cost of living,” he said.  

He also mentioned the Malta Chamber’s position that wage adjustments need to be linked to productivity, as opposed to just the cost of living or other social measures funded by employers. Failing to do this could have dire consequences on the competitiveness of business, especially export-oriented businesses, Cuschieri said. 

Meanwhile, Xuereb said Malta will only be able to mitigate the effects for so long. “We can superficially shield ourselves from the direct impact of higher spending on defence by waving the neutrality flag, just like we did when we fully subsidised energy costs. But we still must deal with the indirect effects of imported inflation, different funding priorities for the EU, the impact on consumer confidence in Europe, and more pronounced exchange rate risks when dealing in other currencies.” 

The European picture 

As the US shows itself to be an unreliable partner, the EU is starting to think about self-reliance. Xuereb pointed out that this situation is not new, citing how Europe once relied on cheap gas from Russia before the Ukraine war and depended on the US for defence up until now. With Trump unlikely to offer future support on defence, the EU will have to become more self-reliant and increase its defence spending – and that money will need to come from somewhere. 

“A minority of businesses can benefit from increased spending on various forms of defence. The rest are more likely to be adversely affected by more public debt, higher taxes, or less spending on other things, such as infrastructure. But just like European businesses had to deal with higher energy costs and accelerate their transition to renewables, they will have to deal with this, too. There are no options for Europe other than to get its act together,” she said.  

Cuschieri said the EU needs to react faster to the business world by reducing bureaucracy and over-regulation, which he said have been burdening businesses for years. “In times of heightened uncertainties, this is key to reducing the burden on EU-based companies when compared to their global counterparts. The Malta Chamber has constantly and consistently been insisting, at both local and EU levels, that this is key to the survival of EU-based companies.” 

For Xuereb, what’s important for European businesses is to keep their eye on the prize and not lose sight of long-term objectives. “The EU is curtailing corporate sustainability reporting, and that is a good thing because more bureaucracy will only increase unproductive costs and reduce European competitiveness. But the focus on developing and investing in more sustainable technologies must remain,” she said. 

Xuereb stressed that consolidating businesses is essential for making large-scale digital investments viable, which is crucial for addressing current demographic and competitiveness challenges. She also insisted on accessible financing to support technological advancements and the continuous upskilling of the workforce to maximise the benefits of emerging technologies. “And while the US has substantial leverage, Trump’s bullying tactics are earning him a lot of enemies that could shift their reliance away from the US to each other instead,” she said. 

Businesses will scramble to mitigate the effects of these tariffs, but Cuschieri reminded that, between the lack of clarity on the US administration’s ultimate policy objectives and the potential retaliatory actions by the countries affected, we could be staring down the barrel of a global recession, with a contraction of historic proportions. “Addressing this situation urgently and in a cool-headed manner is a must!”